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How to find an alternative cost


How to find an alternative cost</a>

Making a choice in favor of something, sometimes you have to give up some other, alternative proposals, choosing the best one.

The cost of goods or services, from the purchase of which a person refuses, for the sake of buying another is called an alternative cost.

Alternative cost is used in the economy and in ordinary human activities.



In monetary terms, the alternative costIs determined by the formula: The price of choice is equal to the costs of purchasing the chosen option plus the lost revenue from the rejected option. All this, as a rule, corresponds to one time unit - a year or a month.


So if a person can buy two goods - AAnd B, equally interesting to him, and chooses all the same goods A for n-quantity of money, then the value of the second commodity is determined as m and come to the conclusion that the alternative purchase price A will be equal to m. That is, if necessary, you can buy an alternative product for the calculated price.


Alternative cost is often applied toHuman activity. For example, when going to a nightclub, the cost of entering the club, food and drinks is calculated and the total amount is calculated. An alternative to a nbsp-club might be dinner at home - & nbsp-it would cost a person a & nbsp-less amount. This amount is its alternative cost. It can be added to this calculation that the time spent in the club could be devoted to the work or the solution of domestic affairs.


A person who earns 150 rubles per hour should understand that one hour at home or in the circle of friends will cost him 150 rubles. This is the alternative cost of one hour of his life.


In fact, the alternative cost impliesUnder the cost of unused opportunities. Based on the theory of alternative cost, many of the nbsp factors of economic life are determined: the evaluation of investment projects, the analysis of the risks of investing capital, etc. The question of the alternative arises from the fact that human and economic resources are not unlimited, so a person has to choose the options that seem to him to be the best for a certain period of time.


One of the main postulates of the economy andEntrepreneurship is the thesis that money should be invested in projects that bring the greatest benefit, and they need to invest as long as the income from the project exceeds the alternative value of the invested funds.

How to find an alternative cost Was last modified: June 20th, 2017 By Vaovaiwt
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