Keyword Analysis & Research: opportunity cost formula


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Frequently Asked Questions

What is the formula for calculating opportunity cost?

The formula for calculating an opportunity cost is simply the difference between the expected returns of each option: Opportunity cost = return of most lucrative option not chosen - return of chosen option. Say option A in the above example is to invest in the stock market hoping to generate capital gains returns.

How do you calculate opportunity cost?

One formula to calculate opportunity costs could be the ratio of what you are sacrificing to what you are gaining. If we think about opportunity costs like this, then the formula is very straight forward.

Is there a formula to calculate the opportunity cost?

Given the versatility of the concept, opportunity cost doesn't have a clearly defined or designated formula. Instead, there is a common mathematical method for assessing it and coming up with useful figures. This method is as follows: Opportunity Cost = Return on Foregone Alternative Option − Return on Chosen Option


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