The Concept Of Opportunity Cost Essay

The Concept Of Opportunity Cost Essay

Length: 1926 words (5.5 double-spaced pages)

Rating: Strong Essays

Open Document

Essay Preview

Question 1
Discuss the importance of the concept of opportunity cost. In your discussion you are required to identify and explain:
∗ The concept of opportunity cost and why it is a fundamental concept in economics
Opportunity cost is defined as the decision made to give up the highest-valued alternative in order to engage in another activity (Garnet & O’Brien). Alternatively, opportunity cost can be defined as the highest value alternative that is given up in order to undertake a particular activity. Opportunity cost is generally defined in monetary terms, such as the government spending $550 million on upgrading the Adelaide oval rather than placing that money into the public transport system. However, opportunity cost can be shown in general terms, such as the choice to study at university rather than work full time. In simple terms, opportunity cost exists due to limited resources and unlimited wants.
∗ Why the concept of opportunity cost is important to individuals (and illustrate with an example(s))
The concept of opportunity cost is becoming increasingly important in society as more and more household incomes are becoming stretched to the limits. Opportunity cost illustrates the decisions individuals make everyday, whether it is buying a hamburger for lunch for $5.00, or packing lunch at home and saving the $5.00. When taking this into consideration, if an individual purchased a $5.00 hamburger every day for lunch for 15 years, (provided that the individual is working five days a week) the amount of money spent on hamburgers is roughly $19,500. This could lead to financial losses, such as buying a new car to get to work, or buying a new laptop for work. The concept of opportunity cost helps the individual know how to maximi...


... middle of paper ...


...n its own. Therefore, as there is a shortage in supply the suppliers will produce more and therefore the price will rise as a result.


∗ At what price will suppliers be able to sell 22,000 bushels of corn?
Supplies can sell 22,000 bushels at the price of $18 per bushel.

∗ Suppose the market price is $21 per bushel. Is there a shortage or a surplus in the market?
If the market price for bushels is $21, then there will be a surplus.

∗ What is the quantity of the shortage or surplus?
The surplus occurs due to 28,000 bushels being supplies, however, only 12,000 bushels being demanded.

∗ If the market price is $21 per bushel, what must happen to restore equilibrium in the market? Explain how this would occur.
In order for market equilibrium to restore, the price must fall. In order for this to happen, suppliers must reduce the amount of bushels they are producing.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Opportunity Cost Is An Essential Concept For Understand When Studying Economics

- Opportunity cost is an essential concept to understand when studying Economics. Opportunity cost consists of everything that you give up when you make an economic decision. It exists in nearly every decision that presents itself and is clearly evident in Able 's decision in "I Knew a Guy Once" to remove Wheeler 's 'rules ' from the door, the growth of the Shenzen people from a population of zero to over 9 million in 30 years, and in my decision to take this class. In all of these cases, the decision-makers had to first consider opportunity cost before making their decisions....   [tags: Economics, Opportunity cost, Price, Costs]

Strong Essays
786 words (2.2 pages)

Why Should We Need Opportunity Cost? Essay

- This deceptively straightforward question is guaranteed to generate a lot of class discussion. The reason for the debate is that each student has a slightly different concept of “cost” in mind. By letting the discussion run for five minutes, it becomes clear that what people mean by “cost” is often in the eye of the beholder and depends on what decision they are contemplating. The most frequent answer is $121,200. This is the amount of cash used to operate the club. But this excludes actual physical depreciation....   [tags: Budget, Zero-based budgeting, Depreciation, Costs]

Strong Essays
824 words (2.4 pages)

The Goal Of Business : An Example Of Production Possibility Frontier Essay

- The goal of business is to make a profit, and as much of it as they can. In theory companies could mass produce any item they wish, but they have to be smart about how much they produce so they are able to keep up with supply and demand. Companies have to ensure they are producing the correct number of one item so they are not hindering their production of the other items they produce. They want to find the maximum quantities of items they can make with limited amount of trade-off. This concept is know as the production possibility frontier....   [tags: Economics, Opportunity cost]

Strong Essays
728 words (2.1 pages)

Essay A Study Of Economics From A Textbook Teaching Stance

- Seeing as I have shared my definitions of each author relating to what economics is valuable for, I chose to focus on Taylor’s definition in particular. When Taylor introduced the study of economics from a textbook teaching stance, he began talking about how most people don’t produce what they consume. This is the case in today’s society where advanced civilizations rely almost entirely on the manufacturing business, the retail market, and the service industry in order for citizens to subsist from day-to-day....   [tags: Economics, Economy, Opportunity cost]

Strong Essays
903 words (2.6 pages)

Essay on Marginal Cost And Marginal Revenue

- Hello, In the three articles I researched, each author looks at the following use of marginal cost & marginal revenue in decision-making with a strategic point of view. I looked at Covering Entrepreneurship and small business: Basic economic principles: Part II & I the articles written by Karen Hallows. I also looked at What Are the Benefits of Marginal Costs Equal to Marginal Revenue by Thomas Metcalf. The conclusion in my first article is she looks at the basic principles of economics. Risk and return marginal benefits, marginal costs, and opportunity costs and sunk cost....   [tags: Economics, Microeconomics, Costs, Marginal cost]

Strong Essays
725 words (2.1 pages)

The Fundamental Principles Of Microeconomics Essay

- Perhaps one of the most fundamental principles of Microeconomics is that people face tradeoffs. According to Mankiw, “making decisions requires trading of one goal against another.” This situation of facing tradeoffs stems from the concept of scarcity - which in essence is limited resources - forcing one to make decisions and tradeoffs between several options. A concept well associated with this is opportunity cost - which is defined as how much one has to give up (the cost) in order to get the good or service (generally the alternative desired or wanted)....   [tags: Costs, Price, Opportunity cost, Economics]

Strong Essays
1058 words (3 pages)

Case Study : Opportunity Cost Of Attending College Essay

- Case Study #1: Opportunity Cost In live, almost everything we do has an opportunity cost, whether you are going on vacation or going to college. Opportunity cost is basically the cost of doing one thing rather than doing something else. While going to college, students need to think about what they are sacrificing in order to further their education. Although many people know about the extreme price they are paying for tuition itself, many students don 't factor in the money they could have made if they were to have gotten a job instead of spending their time at school....   [tags: Life expectancy, Mortality rate, Economics]

Strong Essays
2349 words (6.7 pages)

Supply And Demand, Cost Analysis And Capital Budgeting Essay

- In carrying on with the previous example of my present employer, the Australian Football League, I see some real benefits that could improve the organisations performance outcomes – specifically I’d like to consider the concepts of; supply & demand, cost analysis and capital budgeting. The AFL and the concept of supply & demand In describing the concept of supply and demand, supply can be referred to as the amount of specific goods and services that is available to consumers. Supply can relate to the quantity available at a specific price or the amount available at a range of prices....   [tags: Costs, Economics, Marginal cost, Microeconomics]

Strong Essays
730 words (2.1 pages)

The Gum Trade Activity Heightens The Reality Of The Concepts Of Consumers, Choices, Demand And Scarcity

- Achievement Standard 90983 gave a broad spectrum into the economic concepts of consumers, choices, demand and scarcity. While they all relate to one another, it was important to not overwhelm the lessons with all four concepts, as I want the students’ to gain meaning and deeper understanding of all four concepts through these practical exercises. While textbook activities are great for practicing drawing demand curves, the practicality of these lessons puts the students at the centre of their learning and involves them making individual decisions and the cost of their choices....   [tags: Economics, Supply and demand, Opportunity cost]

Strong Essays
822 words (2.3 pages)

The Principle Of Production Possibilities Frontier Essay

- Economics is basically the weighing of trade-offs when making a decision as we have scarce resources and we cannot do everything so we try to allocate the scarce resources in the most efficient way possible. A couple of economic decision-making principles I find important for the issue of weighing of trade-offs is the principle of the production possibilities frontier, opportunity cost and scarcity. In economics most principles are intertwined so even if they are similar concepts it is important to use the key concepts needed while making a decision as its implies subtle differences....   [tags: Economics, Opportunity cost, Scarcity]

Strong Essays
934 words (2.7 pages)