Advanced English Dialogue for Business – Opportunity cost

Listen to a Business English Dialogue about Opportunity cost

David: Hey Charlotte, have you ever heard of something called opportunity cost in finance?

Charlotte: No, I haven’t. What does it mean?

David: Opportunity cost refers to the potential benefits or profits that are foregone when one alternative is chosen over another, often in terms of the next best alternative that could have been pursued.

Charlotte: Oh, I see. So, it’s like the value of the opportunities you miss out on when you make a decision?

David: Exactly! For example, if you choose to invest in stocks instead of bonds, the opportunity cost would be the potential interest income you could have earned from the bonds.

Charlotte: That makes sense. Are there ways to calculate opportunity cost?

David: It can be calculated by comparing the expected returns or benefits of different options and weighing them against each other to determine the best course of action.

Charlotte: Got it. How does understanding opportunity cost help in decision-making?

David: Understanding opportunity cost helps individuals and businesses make more informed choices by considering the full range of alternatives and their respective benefits and drawbacks.

Charlotte: Thanks for explaining, David. It’s important to consider opportunity cost when making decisions.

David: No problem, Charlotte. It’s a fundamental concept in economics and finance that can impact decision-making at all levels.