Answer to Question #182118 in Macroeconomics for Jholaine Parker

Question

• Scarcity, Opportunity Cost, Wants, Entrepreneurship, Markets, Law of Demand, Law of Supply, Market Failure, The Informal Economy, Unemployment Rate, Structural Unemployment, Human Capital, Inflation Rate, Gross Domestic Product, Consumption, Economic Growth, Supply Side Fiscal Policy, Taxation, Public Debt, Fiat Money, Cryptocurrencies, Liquidity, Trade-off between Risk and Return, Monetary Policy, and Saving.

General Instructions:

Choose one concept from the list above, and write a paper a 500 to 550 word paper (500 words is the absolute minimum) in which you state a response to the following prompt;

"Before completing all 5 Graded Discussions I thought about (one of the concepts from the list) in this way ..., now I think ... ".  

Answer 1

OPPORTUNITY COST

Definition – Opportunity cost is the next best alternative foregone.

• If we spend that £20 on a textbook, the opportunity cost is the restaurant meal we cannot afford to pay.
• If you decide to spend two hours studying on a Friday night. The opportunity cost is that you cannot have those two hours for leisure.

Importance of opportunity cost

The fundamental problem of economics is the issue of scarcity. Therefore we are concerned with the optimal use and distribution of these scarce resources. Wherever there is scarcity we are forced to make choices. If we have £20, we can spend it on an economic textbook, or we can enjoy a meal in a restaurant. Therefore, many choices involve an opportunity cost – having to make choices between the two.