All of us are doing something or the other at this point in time. However there are so many other things we could invest our time into. This is the base of the concept of opportunity cost.
- Opportunity cost is the best alternative. For example, right now i am making these notes whereas i could be playing on phone or watching tv. However due to limited time i can only undertake one of these activities so i must consider the pros and cons of both before making my final decision.
- Consumers must decide which product to buy as they cannot buy all the products they want. Therefore they must compare the price and the quality of both products before purchasing it.
- Producers must decide which product to produce as they have limited resources. Therefore they must consider which product has higher demand as they will earn greater profits from the sale of that particular product.
- Government receives tax revenue from tax payers which it can then use to finance defense and public schools and hospitals. However the government only receives a certain amount of money so it can’t finance all three of the entities. Therefore the government must carefully consider which department requires financing.
- Opportunity cost is the best alternative. For example, right now i am making these notes whereas i could be playing on phone or watching tv. However due to limited time i can only undertake one of these activities so i must consider the pros and cons of both before making my final decision.
- Consumers must decide which product to buy as they cannot buy all the products they want. Therefore they must compare the price and the quality of both products before purchasing it.
- Producers must decide which product to produce as they have limited resources. Therefore they must consider which product has higher demand as they will earn greater profits from the sale of that particular product.
- Government receives tax revenue from tax payers which it can then use to finance defense and public schools and hospitals. However the government only receives a certain amount of money so it can’t finance all three of the entities. Therefore the government must carefully consider which department requires financing.