Assessment of Skills and Knowledge(ASK) in Fundamental Business Concepts Practice Test

What is the opportunity cost of placing $500 in the bank instead of purchasing an item desired but unnecessary?

1. Future savings

2. Immediate gratification

3. Security of funds

4. Potential interest earnings

The correct answer is: Immediate gratification

The opportunity cost of placing $500 in the bank instead of purchasing a desired but unnecessary item primarily relates to what you forfeit by making that choice. In this scenario, the correct answer highlights the concept of immediate gratification. When you choose to save the money instead of spending it on something you want now, you are giving up the pleasure and satisfaction of having that item at this moment. This illustrates the trade-off inherent in financial decision-making—opting for delayed gratification (saving) instead of immediate enjoyment (spending). By retaining your funds in the bank, you successfully create a future saving opportunity, but the immediate desire for the item remains unfulfilled. Other choices, while relevant to the overall experience of saving versus spending, do not capture the essence of what is sacrificed at the present moment. Future savings refer to the accumulation of money over time but do not reflect the immediate impact. The security of funds represents the safety of the money in the bank, which does not relate to what you miss out on by not spending. Potential interest earnings, while a financial benefit of saving, do not address the lack of immediate satisfaction from the desired item. Thus, the concept of immediate gratification is the focal point when calculating opportunity costs in this context.