Opportunity Cost Calculator

Formula

The formula to calculate the Opportunity Cost (OC) is:

\[ OC = RB - RC \]

Where:

$ OC $ is the Opportunity Cost ($)
$ RB $ is the Return on the Best Option ($)
$ RC $ is the Return on the Chosen Option ($)

What is Opportunity Cost?

Opportunity cost is the potential benefit or value that is given up when one option is chosen over another. It represents the difference between the return on the chosen option and the return on the best alternative that was not selected. Opportunity cost is a key concept in economics and decision-making, helping individuals and businesses evaluate the relative costs and benefits of different choices.

Example Calculation

Let's assume the following values:

Return on Best Option (RB) = $10,000
Return on Chosen Option (RC) = $7,500

Using the formula to calculate the Opportunity Cost:

\[ OC = 10,000 - 7,500 = 2,500 \text{ dollars} \]

The Opportunity Cost is $2,500.