OPPORTUNITY COSTEconomics

Kimberlie - Ivan

Understanding Opportunity Cost

We make choices every day. We have to, as we have limited resrouces but so many wants. We therefore have to

decide which wants we will satisfy and those we will not. All choices

involve giving something up is called Opportunity Cost.

What is Opportunity Cost?

Opportunity Cost is the cost of a decision in terms of the best

alternative given up to achieve it. It is the best alternative forgone.

Opportunity Cost and ...CONSUMERS WORKERS

Consumers are buyers and users of goods and services. We all are consumers. The vast majority of us cannot buy everything we like. We can sellect the one with wides and the most accurate informative coverage.

Undertaking one job involves an opportunity cost. People employed as teachers might also be able to work as civil servants. They need to carefully consider their preference for the jobs available.

Opportunity Cost and ...PRODUCERS GOVERNMENT

Producers have to decide what to make. In deciding what to produce, private sector firms will tend to choose the option which will give them the maximum point.

Government has to carefully consider, its expenditure of tax revenue on various things. To pay higher taxes, people may have to give up the opportunity to buy certain products to save.

Economic Goods

This mean that it takes resources to produce them and hence, their production involves an opportunity cost. They are limited in supply. Almost every good and service is economic good.

Free Goods

Free goods are much rarer. Economists define free good as one, which takes no resources to make it and thus does not involve an opportunity cost. Example of free goods are water and sunshine.

Production Possibility Curves

A Production Possibility Curves (PPC) is also called an opportunity cost curve, a production possibility boundary (PPB) and a production possibility frontier (PPF).

A PPC shows the maximum output of two products and combinations of these products that can be produced with existing resources and technology.

What is PPC? Production Possibility Curve (PPC) is a

graph/table that shows the maximum possible combinations of outputs that can be produced from given inputs.

VIDEO: OPPORTUNITY COST