Opportunity cost understanding function and for example in a business

Opportunity cost: understanding, function, and for example in a business

Posted on February 4, 2022

Opportunity cost: understanding, function, and for example in a business

Opportunity cost understanding function and for example in a business

Understanding opportunity costs

Do you often hear about opportunity costs? What is the importance in business? Opportunity costs are basically a theory of economic behavior choices with a certain amount of money. For example, you have $ 100. With that money, you can choose to buy a data package or buy fast food.

If you buy a data package, then you lose the opportunity to enjoy the delicious fast food. However, if you decide to buy fast food, you will lose the opportunity to have a data package.

Draft

This one concept is not only related to money and items you want to buy, you know. This concept is also closely related to time, happiness, future investment, and so on. Here are some examples of this concept in terms of several aspects:

Concept of time

You decide to not sell at the Car Free Day Sunday. You get free time, but potential profits certainly disappear.

Future concepts

You intend to take Masters in the Department of Communication to become a lecturer. Your potential for becoming a lecturer is more wide open. The risk, you lose some money in the present, and lose time.

Concept of happiness

You have to overtime in the office. Instead, you get overtime money. However, his happiness will disappear.

Example in business

The concept of opportunity costs can be applied in running a business. For example, you decide to open a Boba drink business and leave a job with a salary of $ 400.

So, the cost of opportunity is $ 400 if viewed from the salary left in order to open the Boba business.

Well, verbally from these results, you will try hard to get more than $ 400 as compensation from the opportunities left behind.

In the same case, for example you spend $ 15,000 to open Boba’s business. So, you leave the potential for vacation to Singapore with the money for example, in order to open a business.

Example in a property business

Property effort is a matter so wide. Many interests. Is you one of them? Understanding opportunity costs is quite useful, you know.

For example, you have an unused house. You decide to rent it out. You will get rent. Instead, you will not be able to occupy the house. Not to mention if there is damage.

Or, you want to build a boarding house. You open opportunities for income aka routine monthly income. However, you will need a cost of renovation, renting a supervisor, and so on.

Function of understanding opportunity costs

The following are the things you will get:

  • Help calculations in business capital. Taking into account the cost of opportunity, then you can guess the capital that must have, and help you in making mature business planning from the capital.
  • Determine priority. The best priority is something that must be decided carefully in the business. Don’t prioritize the wrong things that actually harm you.
  • Save business cash. Opportunity costs occur because not all things can be achieved. So, by applying this theory (even though you have money to buy all choices), you can save business cash and focus on important things.
  • Looking for the best alternative to your business

Conclusion

So, actually the concept of opportunity costs is not difficult right? Before starting a business or career in the professional world, understand this so you can make the best and most profitable decisions. Also record every fee you spend and every income on the good bookkeeping system so you can monitor the overall financial current of your company factually.

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