1. We learn that opportunity cost can be defined as what must be given up to...

1. We learn that opportunity cost can be defined as what must be given up to obtain something else. Can you think of one example of an opportunity cost you came across this past week? Explain how this concept played a role in your decision making.

2. A budget constraint indicates possible combinations of two goods affordable within a certain budget. Can you relate this concept to your own life?

Expert Solution

1) Opportunity cost means choosing one alternative over the other and forgoing the benefits of that left alternative for the choosen alternative is called opportunity cost.

Last week My Friend called me and told me He want to buy One plus 7 and I told him to buy one plus 7 pro. So we both started to discuss between difference in features in both phones and he somehow didn't get convince and bought one plus 7 rather than 7 pro.

In this case he has choosen 7 and lost the benefits that he will get if he has choosen 7 pro instead of 7. This my experience in last week with opportunity cost.

2) Yes in the above case Only if he has bought 7 pro he has to spend more where he will have no money left with him to buy another good. As he bought 7 he is now left with few money for which now he is buying a latest wireless head set for his new phone and back case. Hence as he thought of the budget he spent depending on that.

Similarly everyone will have their own budget constraints on buying goods or services depending on their budget and requirements.

Rahul Sunny answered 1 year ago

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