Answer to Question #170311 in Macroeconomics for Sujith

Question

You win 5000 rupees in best singing competition. You have a choice between spending the

money now or putting it away for a year in bank account which pays 4% interest. What is the

opporuntiy cost of spending Rs.5000 now?

Support the answers with similar instance.

Answer 1

In one year the winner will get 5200 rupees (4% from 5000 rupees equals 200 rupees), therefore, if he spend 5000 rupees now, without putting it away for a year in bank account, the opportunity cost will be 5200-5000=200 rupees.