Choices have an opportunity cost
Every time you choose one thing, you give up the next best alternative. Economists call that sacrifice the opportunity cost.
Formula
Opportunity Cost = Value of Next Best Alternative Foregone
Real World
When Elon Musk left his role at PayPal to found SpaceX in 2002, his opportunity cost included the salary and equity he surrendered — the value of the best alternative use of his time and capital.
Exam Focus
Opportunity cost is always the single next best alternative — never list multiple foregone options, or you will lose the mark.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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