People in the world have unlimited wants – most of us would all like to have large houses, cars etc. However there are limited resources to produce goods and services. The result is that we have to make
For instance we may have just £15 and want both a CD and a video, both of which cost £15. We have to choose one. If we choose the cd then we must give up the video. The video is then said to be the
Another example of Opportunity Cost in business might be the choice that a business
could have in using its profits to give higher dividends to shareholders or
investing in new plant and equipment. If they choose higher dividends then the
new plant and equipment is given up and so is the Opportunity
Cost.