Answer to Question #61734 in Economics of Enterprise for Dinuka PInna

Question

can you give me real world company examples for opportunity cost and scarcity situations?

Answer 1

Opportunity cost is the value of something­ when a particular course of action is chosen. Simply put, opportunity cost is what you must forgo in order to get something.
Examples of Opportunity Cost:
- As a consultant, you get $75 an hour. Instead of working one might, you go to a concert that costs $25 and lasts two hours. ­ - The opportunity cost of the concert is $150 for two hours of work.
- A business owns its building. If the company moves, the building could be rented to someone else. The opportunity cost of staying there is the amount of rent the company would get.
Scarcity dictates that economic decisions must be made regularly in order to manage the availability of resources to meet human needs.
Some examples of scarcity include:
- The gasoline shortage in the 1970's
- After poor weather, corn crops did not grow resulting in a scarcity of food for people and animals and ethanol for fuel.