choice and oppurtunity cost

  Choice And Opportunity Cost

Since the resources are scarce, no economy can produce enough goods and services to satisfy all wants of people. Scarcity of resources in relation to the wants of the people gives rise to the problem of choice. A society has therefore to make a choice about what goods and services and in what quantities should be produced with the given resources. 

    

                  On the other hand the opportunity cost of anything is the next best alternative that is given for it or it is the value of next best alternative good or service that is given up for it. While making a choice a rational decision maker be it a consumer and producer or government must decide on the basis of the opportunity cost calculations. For example given its budgetory resources if government of a country decides to increase its defence expenditure to provide or produce guns for it is defence forces,it will have to curtail its expenditure on agriculture,education and health care.

(blog 4)