This week we introduce decision making in the face of scarcity. Think of a time or...

This week we introduce decision making in the face of scarcity. Think of a time or an example in your life where the monetary cost of an item may be overshadowed by the opportunity cost.

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Expert Solution

The needs in the society are unlimited but the resources are scarce, which gives rise to tradeoffs. People need to trade off between the goods they buy because of the limited income, between the way they allocate time because of the limited time of the day etc.

An example where the monetary cost was overshadowed by opportunity cost, could be the tradeoff between job and furthur studies.

If after high school diploma, a person wishes to pursue higher studies, then he would be at a tradeoff where he could earn wages by utilising his high school diploma or could pursue studies by paying for fees and student loans.

Here the immediate monetary benefit could be higher ie a person could earn wages , and the opportunity cost would be the fees for studies and the wage foregone, yet a person could measure it as a higher earning opportunity in future , when he would earn the graduation degree. So if he considers the opportunity cost as better education, it might foregone the monetary benefit he would have got, had he taken up a job after high school.

(you can comment for doubts)

Rahul Sunny answered 1 year ago

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