Question

Inayah needs Rs.100, 000 to start an ice-cream business. If she uses Rs.40, 000 from her savings and another Rs.60, 000 borrows from the bank. The interest rate is 5% in the market. Find the opportunity cost that Inayah has to bear in order to start a business?

Answer 1

Answer: 5% of RS 100,000

Explanation:

Opportunity cost is what an economic agent such as an individual, form or government forgoes when a choice is made from different available choices.

Here, since Inaya has used Rs100000 for her ice cream business, the opportunity cost will be the 5% interest that she could have made on the money used for the business