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Unit 3 Opportunity Cost

The document explains the concept of opportunity cost, which is the cost of a decision in terms of the best alternative given up. It discusses how opportunity cost affects consumers, workers, producers, and the government, emphasizing the importance of considering alternatives when making decisions. Additionally, it introduces production possibility curves (PPCs) as a tool to illustrate the trade-offs and opportunity costs involved in producing different goods.

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Mannankhan Khattak
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24 views10 pages

Unit 3 Opportunity Cost

The document explains the concept of opportunity cost, which is the cost of a decision in terms of the best alternative given up. It discusses how opportunity cost affects consumers, workers, producers, and the government, emphasizing the importance of considering alternatives when making decisions. Additionally, it introduces production possibility curves (PPCs) as a tool to illustrate the trade-offs and opportunity costs involved in producing different goods.

Uploaded by

Mannankhan Khattak
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Week 3 Economics Grade 9IG

UNIT 3 OPPORTUNITY COST

Aim
1 Define opportunity cost and
analyse particular circumstances to
illustrate the concept.
Opportunity Cost

When we decide to do one thing, we are deciding not to


do something else.

To ensure that we make the right decisions, it is


important that we consider the alternatives.

Opportunity Cost is the cost of a decision in terms of


the best alternative given up to achieve it.
Opportunity Cost and Consumers
Consumers are buyers and users of goods and
services. We are all consumers.

The vast majority of us cannot buy everything we


like.
Opportunity Cost and Workers
Undertaking one job involves an opportunity cost.

People employed in one job might also be able to


work in another job.

They need to carefully consider their preference for


the jobs available.
Opportunity Cost and Producers
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
maximum profit.

They also take into account, the demand for


different products and the cost of producing those
products.
Opportunity Cost and the Government

Government has to carefully consider, its


expenditure of tax revenue on various things.

If it for example decides to spend more on


education, the opportunity cost involved may be:

• a reduced expenditure on health care or


• a raise in tax revenue
Economic Goods and Free Goods

A vast majority of goods are economic goods. This


means that it takes resources to produce them and
therefore, their production involves an opportunity
cost.

A free good is a product which does not require


any resources to make it and so does not have an
opportunity cost.
Production Possibility Curves

A firm producing cars and trucks


What is the opportunity cost of producing 18 more trucks?
Production Possibility Curves

An economy producing
consumer goods and capital
goods
What is the opportunity cost of
producing 15 more tonnes of
consumer goods?
Production Possibility Curves

 Production possibility curves (PPCs) show the maximum


combined output of two or more products a firm or an entire
economy can produce with its available resources

 Resources are being used efficiently if they are producing their


maximum output

 But, because resources are limited, producing more of one


product means producing less of another

 PPCs are therefore a useful way of showing the opportunity cost


of producing more of one product in terms of how much of
another must be given up

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