00:01
So, a college student is faced a difficult decision on how to spend the night.
00:04
She could babysit her professor's child an alley wage of $7 an hour.
00:08
Ooh, that's bad.
00:09
Or she could work at the college library for $6 an hour.
00:13
Or she could finish her economics assignment.
00:17
If she chooses to complete her homework assignment, she's occurred an opportunity cost equal to...
00:27
Let's see.
00:29
So, what an opportunity cost is kind of like your return of best foregone option versus the option that you chose to figure out how much it is costing you to do one option over the other.
00:45
An investor calculates the opportunity cost by comparing the return of two options.
00:49
This can be done by the decision making process by estimating future returns.
00:52
So let's try to figure out what the fo is.
00:55
Fo is the return of the best foreground option.
00:57
So in this case, it looks like $7 or babysitting her professor's child would be the best option.
01:04
So that's going to be fo.
01:05
And co, return of the chosen options.
01:07
She chose to complete her homework assignment.
01:11
That means she's incurred.
01:13
That's a zero cost...