Question

Miguel choose to save for a car instead of traveling around Europe with friends. Though he was sad to miss the trip, he knew it was necessary if he wanted the car. What does this scenario BEST demonstrate?


opportunity cost


inflation


passive income


personal risks

Answer 1

Opportunity cost — he gave up the trip (the next-best alternative) in order to save for the car, so the forgone trip is the opportunity cost of buying the car.