What is the difference between opportunity cost and trade off

Please note: comment moderation is enabled and may delay your comment. There is no need to resubmit your comment. Notify me of followup comments via e-mail. Written by : Tabitha Njogu. Microeconomics: Principles and Policy, Update. Cengage Learning Publishers, Brief Principles of Macroeconomics. User assumes all risk of use, damage, or injury. You agree that we have no liability for any damages. What is an Opportunity Cost?

What is a Trade-off? Similarities Between Opportunity Cost and Trade Off In both concepts, one has to select an option among the many choices In both, each choice made means another alternative has been forgone Differences Between Opportunity Cost and Trade Off Definition of Opportunity Cost and Trade off While opportunity cost is the cost of opting one course of action and foregoing another opportunity, a trade-off is the course of action given up to perform the preferred course of action.

Nature of Opportunity Cost and Trade off In an opportunity cost, one goes for a better alternative while in a trade-off; the belonging is sacrificed completely in the selection process of what one wants. Calculation While the value of the opportunity cost is calculated by computing the return of the most beneficial option less the return of the preferred choice, a trade-off does not have a formula for calculation.

Affiliation to other preferences In an opportunity cost, losses incurred are not taken into consideration. Basis for Comparison Trade-off Opportunity Cost Meaning Trade-off implies the exchange of one thing to get the another. Opportunity cost implies the value of choice foregone, to get something else. What is it? The choices sacrificed. The value of next best alternative.

Represents What is given up to get what is wanted? What could have been done, with what was given up? In economics, trade-off means the exchange, in which a person sacrifices one or more things for getting a particular product, service or experience. It refers to all the courses of action which could be employed, other than the present one. It is a deal, that arises as a compromise, wherein to obtain a certain aspect we have to lose another aspect.

In other words, while making a selection, we have to accept less of something, for obtaining more of something else, the outcome would be trade-offs. For example : Suppose a company wants to start a project, which requires huge investment and other resources, so the trade-off entails the reduction in certain expenses, in order to invest more in the new project.

Imagine you scored a ticket to the Super Bowl. Five grand! That's madness. But hold on. How's that work? The opportunity cost of you using your ticket is the five grand you didn't make by scalping it. Economic Principles. Sometimes, you just have no choice. Once a choice is made people must stick to it. The value of an education is an exclusive personal benefit. Economic choice making principles work better for western societies.

Frequently Asked Questions: How can something be scarce and not in short supply at the same time? How can it be that rich people face as much scarcity as poor people do? Does finding more productive resources make things less scarce? Why, in economic terms, is the price of a good or service different than its cost?

How can you give up something you never had in the first place? Is the production possibility curve ever a straight line? Classroom Activity Options Distribute and discuss the article entitled Scarcity. Bring in an item to use for the simulation — a large cinnamon roll for a morning class, or a gourmet chocolate bar for an afternoon class — something you know many students will want.

Give them 5 minutes to work in groups of 2 or 3 to brainstorm and list as many ways to distribute the item as possible. Re-convene the large group and, in round-robin fashion, list distribution methods on the overhead or whiteboard, until no new ways are proposed. Do not allow discussion during this time, only the listing of the distribution types. Once this exercise is completed, tell students they now have the knowledge they need to make an informed decision and that they will get one vote each to determine how the item will be distributed.

Conduct the vote. Distribute the item as selected by the class. Then, tell the class that what they just did is reflective of economies throughout the world. For each choice, identify the next-best alternative. Example: First choice of the morning: Get up when the alarm goes off.

Alternative: Turn off the alarm and go back to sleep. Second choice of the morning: Take a shower. Alternative: Go back to bed.