This is an economic term that defines true or real cost, in non-monetary terms, as the cost foregoing the next best alternative when making a decision. It implies that the real cost of something is what is sacrificed to get it.
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For instance, what is the opportunity cost of a new motorway?
A hospital
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What is the opportunity cost of a CD
A DVD
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What is the opportunity cost of employing extra staff?
A machine purchase
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What may a marketing departments objectives?
Achieve or exceed monthly sales targets, have dedicated, trained and motivated staff.
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What may be an objective for production?
To sustain efficiency by having the newest machinery and tech. To have a highly motivated and skilled production team.
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What may be the advantages for businesses if they invest in their marketing department?
Increase team size, Increase motivation, Possible sales increase, Improved training.
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What may be the disadvantages for businesses if they invest in their marketing department?
Demotivation of other departments, No mew production machinery or tech, Poorer cash management.
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What are the possible opportunity costs for businesses who invest in marketing?
Possible increase in production forgone by not investing in new machinery.
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What may be the advantages for businesses if they invest in their production department?
Additional workers, New machinery, Increased motivation and output.
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What may be the disadvantages for businesses if they invest in their production department?
Demotivation of other departments, Possible loss of sales, Poorer HR management, Possible cash flow problem.
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What are the possible opportunity costs for businesses who invest in production?
Possible increase in sales if the investment had been made in the marketing department.
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What may be the advantages for businesses if they invest in their HR department?
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