1. We measure opportunity cost in monetary value. Suppose you spend $100 for new clothes. You will say that the clothes cost you $100. But the money you spent is not the real cost of the new clothes. Describe what the real cost----your opportunity cost-----would be if you spent $100 on new clothes.

Opportunity cost is foregone benefits that are attached to an alternative other than the one selected. When you spend $100 on new clothes, it reduces your ability to buy more items in future.

An example:

Suppose you had $150 to buy groceries and new clothes. You spend $100 on buying the new clothes. While buying groceries, the items become more expensive than you had estimated or you wish to buy more items than you had intended. In this case, you would have to give up some of the items you wish to buy since you would not have sufficient funds to purchase all the items that satisfy your preferences at that time.

tallinn tallinn · Answer 2 · 2022-02-10T15:45:47+01:00

When Diminished or reduced purchasing power in future are

For example, suppose you had $150 to buy groceries and also new clothes. then You spend $100 on buying new clothes.
After that While buying groceries, also the items become more expensive than you had estimated or then you wish to buy more items than you had intended.
Further, In this case, you would have to give up some of the items you wish to buy since then you would not have sufficient funds to purchase all the items that satisfy your preferences at that time.

Opportunity cost

According to the Opportunity-cost is foregone benefits that are attached to an alternative but other than the one selected.
Thus, When you spend $100 on new clothes, it reduces your ability to buy more items in the future.

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