Per Unit Opportunity Cost
Definition
Per unit opportunity cost refers to the cost of producing one additional unit of a good or service in terms of the alternative goods or services that must be given up. It measures the trade-off between producing different goods.
Analogy
Imagine you have $10 and you can either buy a slice of pizza for $5 or a burger for $3. The per unit opportunity cost of buying one more slice of pizza is giving up two burgers, because you could have bought two burgers with the same amount of money.
Related terms
Marginal Cost: The additional cost incurred from producing one more unit of a good or service.
Trade-off: The decision to give up one thing in order to gain something else.
Production Possibilities Frontier (PPF): A graph that shows all possible combinations of two goods that can be produced given limited resources and technology.
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