Opportunity cost: the next best alternative given up.
Every choice has a cost
A farmer
A field used for wheat cannot also grow barley this year.
A firm
Engineers working on a new phone are not improving the old one.
A country
Steel used for tanks is steel not used for railways.
The points to remember
- Only the next best alternative counts, not every option.
- Opportunity cost exists because resources are scarce.
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A few goods are not scarce at all.
Economic goods
- Made with scarce resources.
- Have an opportunity cost.
- Bread, phones, haircuts.
Free goods
- Not scarce: there is enough for everyone.
- No opportunity cost.
- Air to breathe, sunlight, sea water.
The points to remember
- A free good has no opportunity cost.
- Free goods are rare: clean air in a city can become scarce.
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A Paper 2 definition in this shape could appear, for 2 marks.
The government's new stadium has a high opportunity cost.
Define the term opportunity cost.
Model answer plan
See the answer broken into clear points, with guidance on how each point earns marks.
What earns each mark
| Answer | Marks |
|---|---|
| The cost of a choice | 1: vague |
| The next best alternative given up when a choice is made | 2: accurate |