Introduction:
Assignment 1.3 dives into the role of definition in technical writing. Definitions play a critical role, especially in a professional setting, as they allow people to gain insight, knowledge, and awareness of a particular field. I will provide three definitions for this assignment: parenthetical, sentence, and expanded. My complex term will be “opportunity cost,” used in economics, finance, and accounting.
Complex Term:
Target Audience: Individuals interested in finance, economics, or accounting.
Parenthetical definition:
The benefits lost from an individual deciding on an alternative decision over another.
Sentence definition:
An individual incuring a cost from engaging in one activity but forgoing the potential benefits from the alternative path. In other words, it describes the consequences of giving up an opportunity to partake in a different option. This term is frequently used in economics, finance, and accounting to evaluate choices.
Expanded definition: Opportunity Cost
History: Friedrich von Wieser was the first economics professor to publish research that included “opportunity cost” in 1914 (Baye, 2007). The purpose of Wiesser’s inclusion of opportunity cost was to understand better what it means to make a decision and to rationalize it through a quantitative lens. Thus, the idea of opportunity cost was created so that people can make the most optimal decisions.
Application/Example: Opportunity cost has now been widely adopted in economics, finance, and accounting to make key financial decisions. For example, opportunity cost is evaluated to determine which investments in bonds will have the greatest return on investments, or from a macro perspective, economists suggesting to raise to lower taxes. Furthermore, opportunity cost can also be applied to everyday life. For instance, when we decide whether to commute through transit or to drive, we can calculate the opportunity cost of our time spent on transit that could have been saved by driving: total time spent on transit subtracted by total time spent diving equals the opportunity cost of that time spent doing something else.
Equation: Opportunity Cost = Return On Best Forgone Option – Return on Chosen Option
Visual:
Citations:
Baye, M. R. (2007). Managerial economics and business strategy (6th ed.). New York: McGraw Hill.
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