Your friend's and your birthday is on the same day.on the occasion both of you exchange gifts each of you spend rupees 200 on buying a gift both of you also spend rupees 400 on your party and share the expenses equally did both of you incur any opportunity cost of celebrating the birthday if so what is it? explain it fully?
Dear Student,
As both the friends individually incurred a cost of Rs 400 each, thus, the individual opportunity cost is Rs.400.
This is because, opportunity cost is the cost incurred or the sacrifice made while foregoing an opportunity for gaining another.
Therefore, in this case, each friend incurred Rs 200 first (for buying gifts) and then equally shared the money spent on the party, i.e. Rs 200 each (Rs 400 divided by 2). Hence, the total cost incurred by both the friends for celebrating birthday is Rs.400 each.
As both the friends individually incurred a cost of Rs 400 each, thus, the individual opportunity cost is Rs.400.
This is because, opportunity cost is the cost incurred or the sacrifice made while foregoing an opportunity for gaining another.
Therefore, in this case, each friend incurred Rs 200 first (for buying gifts) and then equally shared the money spent on the party, i.e. Rs 200 each (Rs 400 divided by 2). Hence, the total cost incurred by both the friends for celebrating birthday is Rs.400 each.