can someone teach me how to calculate per unit opportunity cost
http://education-portal.com/academy/lesson/how-to-calculate-opportunity-cost.html#lesson
Of course! I can explain how to calculate per unit opportunity cost.
Opportunity cost is the value of the next best alternative that is forgone when making a choice or decision. It is commonly expressed in terms of the opportunity lost per unit or item.
To calculate per unit opportunity cost, you would follow these steps:
1. Identify the decision you need to make – What alternatives are available to you?
2. Determine the benefits or returns of each alternative – Consider the potential gains or benefits of choosing each alternative. Assess the value of what you will gain or produce from each alternative.
3. Calculate the opportunity cost – Subtract the benefits or returns of your chosen alternative from the benefits or returns of the next best alternative. This difference represents the opportunity cost per unit.
Here is a formula to help you calculate it:
Opportunity Cost per unit = Benefits of Next Best Alternative - Benefits of Chosen Alternative
Let's consider an example to make it more clear. Imagine you have two investment options:
Option A: You can invest $1,000 and expect a return of $1,500.
Option B: You can invest $2,000 and expect a return of $3,500.
By calculating the opportunity cost per unit, we can determine which option is more beneficial.
Opportunity Cost per unit = Benefits of Option B - Benefits of Option A = ($3,500 - $2,000) / 1 unit
In this case, the opportunity cost per unit is $1,500. Therefore, for each additional unit, you would be giving up $1,500 of benefit by choosing Option A over Option B.
Remember, opportunity cost involves comparing the benefits of different alternatives to assess the relative value of each choice.