Question

Holly used savings to pay for the books for her college courses. In choosing to take money from her savings she gives up the interest that could have been earned on that investment. What is this trade-off called?

Answer 1

Answer:

opportunity cost

Explanation:

opportunity cost is a concept in economics used to describe opportunity lost or alternative use of resources forgone as a result of allocation of resources to alternatives. In the example above holly gives up the interest that could have been earned from her investment and allocates the money resource to another alternative-book. Her opportunity cost here is the investment value as a result of the interest that would have accrued to her.