Answer to Question #169257 in Microeconomics for EUGINE HAWEZA

Question

(a)

i) Explain the term “opportunity cost”.

ii) Illustrate with examples the practical importance of this concept with reference to the individual, the firm and the state

(b)Define the following with examples

,i. Economics

ii. Microeconomics

iii. Macroeconomics

Answer 1

a) i) Opportunity Cost is the value of a forgone option where choice has been done.

Example ;

The opportunity cost to a student of purchasing a revision book and the shirt he would have bought which he sacrificed to get the textbook.

b)

i) Economics is the study of how human beings strive to satisfy their unendless wants using the available scarce resources.i.eProduction, Transportation.

ii) Microeconomics is the study of the factors that affects the business or individual within the business area.It majorly focuses on supply and demand, and other forces that determine price levels. i.e Resources and Prices.

iii) Macroeconomics is the study of the external factors that affect a business unit. It focuses on the economy as a whole, trying to determine its course and nature i.e Competition and Technological factors.