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It is the estimated value of the best alternative or the best option that one misses out as a consequence of picking one particular option.
Example: Spending a limited resource, lik...
Opportunity cost in non-financial situations is more difficult to quantify. The loss or gain with choosing an option while foregoing another can be subjective and not readily comparable.
The way to calculate the opportunity cost is to subtract the value of the option from the value of the alternative that is foregone.
Opportunity Cost = Return on the best foregone al...
Opportunity cost calculation is essential to individuals, corporations and governments, where there are decisions to be made regarding limited resources like time, money and effort. Choosing...
Many people and organizations fail to take into account the various opportunity costs.
Certain external constraints make us overestimate the opportunity cost, as we start to imagine all the foregone options as a missed opportunity and start to see the situation irrationally. This can...
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It happens when consumers change their preference between two options when presented with a third option, or decoy.
The decoy is priced to make one of the other options much more attra...
When consumers are faced with many alternatives, they often experience choice overload that increases anxiety and hinders decision-making.
Consumers try to reduce this anxiety by selecting only a couple of criteria (say price and quantity) to determine the best value for money.
A decoy steers you in a particular direction while giving you the impression that you are making a rational, informed choice.
Consider the price of drinks at a well-known juice bar: a small (350 ml) size costs $6.10; the medium (450 ml) $7.10; and the large (610 ml) $7.50. The medium is a slightly better value than the small, and the large better still. The medium is designed to be the decoy, steering you to see the biggest drink as the best value for money.
If you buy the biggest, was it because you made a sensible choice, or have you been manipulated to opt for bigger than intended?
The reason people jump to conclusions is the fact that they find it easy.
Fact-checking and 100 percent accuracy on everything they see or observe consume way too much time for a normal person.
Taking mental shortcuts is the path most people choose to jump to conclusions.
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You’ll save far more if you don’t buy a car or sell it if you already own one but can go without it.
If you can use public transportation, you can save quite a bit of money on ...
Carpool to work if you can to significantly reduce wear and tear on your car, save on gas, and take advantage of carpool lanes that might make it easier to get to work.
Check at least once a month to keep the tires on your vehicle properly inflated. Doing so can improve your gas mileage.
Refinance your home or automobile at a lower rate to save money over the life of the loan and lower your monthly payment.
If your student loans are locked in at a high-interest rate, figure out whether it makes sense to consolidate all or some of them.
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