Opportunity cost is a big factor in decision making because it is the value you can't have because you chose the other option. Thus, the person who needs to make a decision should weigh the options to come up with the best decision.
How does opportunity cost affect decision making?
Opportunity cost in decision making especially in business decision making is quite important. This forms the basis of making a decision where monetary cost of the losses can be measured if we choose one option over another. Generally a decision maker will go in with the option that has a lesser loss in terms of finances. It is important to measure opportunity cost before taking any decision especially you have the choices before you.
When it comes down to personal finance, one economic principal rules the roost opportunity costs.
With more household incomes stretched to the limits in the wake of the
global economic slowdown, this principal is quickly becoming a budgeting
essential. However, the rule doesn't just affect what we spend our
money on,it also dictates much of our personal finance lives.