Given:
Value forgone = 5
Value gained = 4
To find:
The opportunity cost
Solution:
Opportunity cost can be stated as the loss of some effective gain when one alternative is selected over the other. The following is the formula to calculate the opportunity costs,
[tex]\text{Opprortunity cost }=\frac{\text{Forgone value}}{\text{Gained value}}[/tex]
On plugging-in the given values in the above formula, we get
[tex]\Rightarrow\text{Opprortunity cost }=\frac{5}{4}[/tex]
Therefore, the opportunity cost is 5/4.
