Opportunity Costs are an important component of Economic studies and forms a core domain of Economics. Many people define Oppurtunity costs in many ways and there are various approaches to analysing opportunity costs.
For practical purposes what is Opportunity Costs ? They are basically of two kinds..costs of missed opportunities and also the costs of Alertnate choices as the case might be.
We see Opportunity Costs in the case of missed Business opportunities and Opportunity costs of a different kind in the use of resources for alternate production in the areas of Manufacturing.
Let us take the case of Oppurtunity costs in the form of missed Oppurtunity with regards to Business Economics.
QUANTITY DEMAND PRICE REVENUE
TEA 7 8 7 49
COFFEE 6 5 8 48
Note the context of missed Opportunities;
Demand for tea was 8 but quantity produced was only 7 and there is loss of opportunity of one tea
Also note that one extra coffee was made with one coffee as wasted opportunity.
Loss of income due to missed opportunities id to the tune of 7 + 8 which is 15
The economic Revenue so to say is less than the Market Revenue;
TOTAL MARKET REVENUE IS 49+48 which is 97
Loss of opportunity is 15
SO ECONOMIC REVENUE IS 97 – 15 WHICH IS 82
ECONOMIC REVENUE = MARKET REVENUE When TEA PRODUCED IS 8 AND COFFEE IS 5