Opportunity Cost Examples

Let’s say you got $50,000 in your bank account, which you don’t need immediately. You can have many options with this cash. For example, you can just keep this cash, or you can invest this money in stocks.

Let’s say you would have invested wisely that money in some good stocks, and after a year, 50,000 would become $60,000. On the other hand, if you keep this money idle instead of investing in cash, then your opportunity cost will be the difference between 60000 and 50000, i.e., $10,000

Your school has announced a vacation. You finally get a chance to go on holiday for the next 1 month. But suddenly you come to know that training is scheduled for your favorite sports which you do not want to miss.

So, if you go on vacation, your opportunity cost will be missing the training session, and if you stay for training, then your opportunity cost will be enjoying the vacation.

A country’s government is preparing its budget. It has some surplus which can be used for paying off its debtor or it can be used for introducing some welfare schemes for its citizens such as subsidies.

If it pays off its debt instead of a welfare scheme, it would be classified as an opportunity cost for its citizens.

You have a steady job with a good income, but your passion is to open your own business, which requires you to leave your current job, and you have to spend a lot of money on opening a business. You have both options.

If you are choosing a steady job instead of opening a new business, then your opportunity cost will be not having the work you wanted and maybe success because of the new business. If you start your business, the opportunity cost would be a steady job and a regular paycheck.

You are having shares of a company worth $5,000. You are thinking of selling that shares now or waiting for 2 more months.

Let’s say, after 2 months, shares would be worth $6,000. If you sell the shares now, then your opportunity cost would be 6000-5000= $1,000, which you could have gotten if you would have waited for 2 more months.

You have got $20,000 which you are thinking of either investing in shares of some company, or you can invest this money in getting a higher degree in a good university.

If you invest in stocks, then your opportunity cost would be higher degrees and a higher salary because of the degree. But if you invest in a higher degree, then your opportunity cost would be the profit gained from those shares.