Title: Why Is Opportunity Cost So Important in Business? | SB
Headings: Why Is Opportunity Cost So Important In Business?
Why Is Opportunity Cost So Important In Business?
The Importance of Opportunity Cost
The Implications for Small Businesses
Measuring the Most Effective Way to Spend
Widening Your Knowledge and Making Better Decisions
Enabling Better Management and Ownership
Enabling Better Leadership
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Content: opportunity cost. When you make a choice, it automatically means that you are foregoing something else in its place. For instance, in the example quoted above, if you spend more on buying new equipment, the opportunity cost would be the extra money you could have saved by waiting. On the flip side, if you took the second option, then you are invoking an opportunity cost of a different sort. Maybe the new equipment in question offers superior efficiency or productivity to your organisation; by waiting for prices to fall, you would have lost out on these benefits. Professor Dan Ariely, a well-known author and scholar of behavioural economics, explains it more succinctly: " Money is all about opportunity cost. Every time you spend (it) on something, that's something you can't spend on something else." The Implications for Small Businesses
Opportunity cost is considered a fundamental principle in economics because it deals with the central problem of scarcity.