Opportunity Cost | O Level Economics 2281 & IGCSE Economics 0455 | Detailed Free Notes To Score An A Star (A*)

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Opportunity Cost

Opportunity cost means the cost of a decision in terms of the next best opportunity given up to take this decision
- It is ONLY the next best decision
- If I can do 4 things in this order in the current hour: Play games, eat food, read, or make notes, and I choose the play games, then eating food becomes the opportunity cost.
- If I select to read, then making notes becomes the opportunity cost, because that is the next main decision that I left.
Limited resources means that a choice is involved in every economic decision, therefore, opportunity cost is involved as well.
Every part has to consider opportunity cost when taking decisions.
- Consumers have limited income, they can’t buy everything.
- Workers can take one job but have to leave another
  - If they decide to work, they are leaving education as well.
  - Or business as well.
- Producers
  - They can’t make everything, they have to decide based on the resources
- Government
  - Government spending is limited, so they need to decide where to spend.

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