Presented To:Sir Bilal Aziz Presented By:Aleesha Yousaf Roll Number:2020 - Bbit-71

Presented to :sir Bilal Aziz
Presented by :Aleesha yousaf

ROll number :2020_BBIT-71
what is oppournity cost ?
Opportunity costs represent the potential

benefits an individual, investor, or business
misses out on when choosing one
alternative over another. Understanding the
potential missed opportunities foregone by
choosing one investment over another
allows for better decision-making.
Tpyes of opporunity cost
There are two types pf opporunity cost :

• Explict cost
• Implicit cost
Explict cost
Explict cost are the direct costs of an actions
(business operating costs,expenses),executed
either through a cash transactions or a physical
transfer of resource is called the explict cost.
Example
• land
• infrastructure
• rent
• material
• utilities
implicit cost
implict cost also referred to as

implied ,imputed or notional costs are the
oppournity costs of utilizing resources owned
by the firm that could bee used for other
purposes is called the implict cost
Example
implict cost include the loss of interest income
on funds and the deprections of machinery for
a capital project
Example of oppurnity cost
A student spends three hours and $20 at the

movies the night before an exam. The
opportunity cost is time spent studying and
that money to spend on something else. A
farmer chooses to plant wheat; the
opportunity cost is planting a different crop, or
an alternate use of the resources (land and
farm equipment).
sunk cost
• A sunk cost refers to money that has

already been spent and which cannot be
recovered. In business, the axiom that one
has to "spend money to make money" is
reflected in the phenomenon of the sunk
cost. A sunk cost differs from future costs
that a business may face, such as
decisions about inventory purchase costs
or product pricing. Sunk costs are
excluded from future business decisions
because the cost will remain the same
regardless of the outcome of a decision.
Non-monetary cost
• Non-monetary costs are the things that

cost you personally, but not your bank
account. Non-monetary costs are
measured in units other than money.
These costs could be time, convenience,
or even effort.
Non monetary costs and benefits
• Non_ monetary costs impacts such as
enivornment ,social or health effects that
can not be valued cost effectively
Advantages of oppournity cost
• Opportunity Cost helps a manufacturer to

determine whether to produce or not. He
can assess the economic benefit of going
for a production activity by comparing it
with the option of not producing at all. He
may invest the same amount of money,
time, and resources in another business
or Opportunity.put simply an oppournity
cost is a potential benefits that someone
loses out on when selcting a particular
option over another . in the case of
comparative advantage the oppournity
cost for one company is lower than that of
another.
Disadvantages of oppournity cost
• Time consuming
• unproductive
• Awareness of lost opportunity
• Realtive price
• Lack of accounting
Enonomic and accounting profit
Economic profit is total revenue minus

explicit and implicit (opportunity) costs. In
contrast, accounting profit is the difference
between total revenue and explicit costs- it
does not take opportunity costs into
consideration, and is generally higher than
economic profit.
Saving of cost
Cost savings, also known as cost reductions

or 'hard' cost savings, are savings that
directly impact the company's bottom line
(i.e. profit/loss). These are the savings you
most likely think of when you hear the term
cost savings.
Compartive and absoulate advantages
Absolute advantage: The capability to produce

more of a given product using less of a given
resource than a competing entity. comparative
advantage: The ability of a party to produce a
particular good or service at a lower marginal
and opportunity cost over another.
Production possibilites Curve
The production possibilities curve (PPC) is a

graph that shows all of the different
combinations of output that can be produced
given current resources and technology.
Sometimes called the production possibilities
frontier (PPF), the PPC illustrates scarcity and
tradeoff.
Factors of productions
1. Economists divide the factors of

production into four categories: land,
labor, capital, and entrepreneurship.
The first factor of production is land, but
this includes any natural resource used
to produce goods and services.
2. Land \natural resources
Labor
capital
Entreneurship
Oppournity cost at government level
When the government spends $15 billion on

interest for the national debt, the opportunity
cost is the programs the money might have
been spent on, like education or healthcare. If
you decide not to go to work, the opportunity
cost is the lost wages.

Presented To:Sir Bilal Aziz Presented By:Aleesha Yousaf Roll Number:2020 - Bbit-71

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Presented To:Sir Bilal Aziz Presented By:Aleesha Yousaf Roll Number:2020 - Bbit-71

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Presented to :sir Bilal Aziz

Presented by :Aleesha yousaf

Opportunity costs represent the potential

There are two types pf opporunity cost :

implict cost also referred to as

A student spends three hours and $20 at the

• A sunk cost refers to money that has

• Non-monetary costs are the things that

• Opportunity Cost helps a manufacturer to

Economic profit is total revenue minus

Cost savings, also known as cost reductions

Absolute advantage: The capability to produce

The production possibilities curve (PPC) is a

1. Economists divide the factors of

When the government spends $15 billion on

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