Opportunity Cost
🧠 What is Opportunity Cost?
Opportunity cost is the next best alternative that you give up when you make a choice.
Every time you choose something, you give up something else. That "something else" is your opportunity cost.
📌 Simple Definition:
Opportunity Cost = What you give up when you choose something else.
📚 Examples You Can Relate To:
| Decision | Opportunity Cost |
|---|---|
| Studying IGCSE Economics | Studying another subject instead |
| Going to the cinema | Money you could have earned babysitting |
| Government building a new airport terminal | Using the money to build homes for the poor |
| School buys 100 laptops | Science lab equipment they can’t afford now |
| Going to university | Salary you could have earned if you had worked instead |
🤔 Why Is Opportunity Cost Important?
Opportunity cost is important because resources (like money, time, and labour) are limited, but our wants are unlimited. So we must make choices.
When we choose one thing, we lose the benefit of the next best alternative.
💡 Who Faces Opportunity Costs?
1. Consumers (Buyers):
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Have limited money.
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Must choose between products.
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Example: Buying a phone vs. buying a tablet.
2. Workers:
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Choose one job/career over another.
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Example: Becoming a doctor means you can’t be an engineer.
3. Producers (Businesses):
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Decide how to use their resources.
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Example: Toyota choosing to invest in electric cars instead of petrol cars.
4. Governments:
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Have limited budgets.
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Must decide between projects.
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Example: Spending more on roads means spending less on hospitals.
✅ Key Point to Remember:
All choices involve an opportunity cost. Wise decision-makers choose the option with the greatest benefit or highest return.
🎯 Quick Recap:
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Opportunity cost = next best thing you give up.
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Affects everyone: consumers, workers, producers, and governments.
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Helps in making smart economic decisions.