What is Opportunity Cost?

Opportunity cost arises whereby you are forced to make a decision between two options, usually because of financial constraints. The 'opportunity cost' is the option that you do NOT choose.


For example, imagine that you are a delivery shop owner that has just been loaned £10,000 from the bank for improvements. You can either choose to buy a new delivery van for £6000 which will allow you to increase your amount of customers, or you can choose to buy a new low-fat fryer for £5000 which will improve quality (but you can't buy both).
If you choose the delivery van, then you concede the opportunity cost of improved quality as this is a missed opportunity that could have improved the business (hence it can be considered to have 'cost' you).

Related Business Studies A Level answers

All answers ▸

What is the Triple Bottom line?


To what extent do you think that UK businesses will experience a fall in profit if governments limit free trade by adopting protectionist policies?


Explain one advantage and one disadvanatge of using temporary staff. (6 marks)


Assess & Compare the Advantages and Disadvantages of TQM with Quality Control.


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences