Question

1. Explain the concept of opportunity cost and discuss how it relates to the problem of choice between alternatives

2. In what ways does money facilitate specialization and division of labour?

3. economics used to be known as the dismal science because it pointed out that choices had to be made between scarce alternatives. Assess the prospects of scarcity being eliminated in the foreseeable future.

Answer 1

Answer : 1) Everything has alternative choice in this world. But a person can choose to purchase or consume only one product or service for scarcity or for limited resource. In this case the person select the best one and sacrifice the second best one. This sacrificed second best choice create the cost to the person which is called opportunity cost.

Because of existing alternatives the person has to choose only one because of scarcity. In this case the person face a problem of choosing one and finally choose any one which is best for him and sacrifice other which makes opportunity cost to him. Thus, opportunity cost is related to the choice problem.

Example : Let a student has 20 rupees and he wants to purchase a book and some thing else. But the problem is that the price of both is same ,i.e., 20 rupees. In this case the student has to choose any one of them. Now let the student choose the book to purchase according to his necessary . As a result the opportunity cost occurs to the student because of sacrificing others.