The Opportunity Cost of the Stockout Includes Lost Contribution Margin

question 96

True/False

The opportunity cost of the stockout includes lost contribution margin on the sale NOT made plus any contribution margin lost on future sales due to customer ill will.

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Definitions:

Substitution Effect

The economic understanding that as prices rise or income decreases, consumers replace more expensive items with less costly alternatives.

Wage Increase

A rise in the rate of pay employees receive for their work.

Leisure

Free time not taken up by work, during which individuals can engage in activities of their choice for relaxation or pleasure.

Income

Income earned from employment or investments, typically on a consistent basis.