Economic Concepts
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, Economic Concepts
1. Principle 2: Opportunity Cost: The cost of something is what you give up to get it
2. Principle 5: Trade (or Specialization) can make everyone better off
3. A market equilibrium
4. A market surplus
5. A market shortage
Principle 2: Opportunity Cost: The cost of something is what you give up to get it
In economists, opportunity cost refers to the cost of not doing something after
selecting the best alternative. When time, autonomy, and money are scarce, selecting one
opportunity requires one to forego the others. In life, everything we do won our values and
priorities. According to Mankiw and Taylor (2014), everyone is faced with trade-offs when
making choices. There are instances when choosing one thing base i to mutually exclude
other opportunities. Every time we make such choices, we forfeit the benefits that we could
get from other alternatives (Gillman, 2011). The cost of such benefits that are forfeited
constitutes the opportunity cost. We should not evaluate the quality of a decision we make in
isolation from the available alternatives. The price one pays, the benefits one gives up, and
the sacrifices one makes for making a choice constitutes the opportunity costs (Gillman,
2011). In summary, the opportunity cost is the cost of overlooking the opportunities that are
different options would have provided.
Although we compute many costs in monetary terms, it does not mean that we do not
incur expenses on the missed opportunities that we do not spend on. For instance, one may
not need to pay money to take a walk and enjoy the sunset, however, there might be an
opportunity cost. One could have earned some $100 doing some work during that time. One
can also use that time to read a book or visit a friend. All these are the opportunity costs of
deciding to take a walk. If you choose to pay $100,000 to pursue your MBA in a given
This study source was downloaded by 100000858663287 from CourseHero.com on 12-07-2022 15:17:52 GMT -06:00
https://www.coursehero.com/file/61962002/Order351060631-Economic-Conceptsdocx/
Student Name
Student Number ID
Course Number
This study source was downloaded by 100000858663287 from CourseHero.com on 12-07-2022 15:17:52 GMT -06:00
https://www.coursehero.com/file/61962002/Order351060631-Economic-Conceptsdocx/
, Economic Concepts
1. Principle 2: Opportunity Cost: The cost of something is what you give up to get it
2. Principle 5: Trade (or Specialization) can make everyone better off
3. A market equilibrium
4. A market surplus
5. A market shortage
Principle 2: Opportunity Cost: The cost of something is what you give up to get it
In economists, opportunity cost refers to the cost of not doing something after
selecting the best alternative. When time, autonomy, and money are scarce, selecting one
opportunity requires one to forego the others. In life, everything we do won our values and
priorities. According to Mankiw and Taylor (2014), everyone is faced with trade-offs when
making choices. There are instances when choosing one thing base i to mutually exclude
other opportunities. Every time we make such choices, we forfeit the benefits that we could
get from other alternatives (Gillman, 2011). The cost of such benefits that are forfeited
constitutes the opportunity cost. We should not evaluate the quality of a decision we make in
isolation from the available alternatives. The price one pays, the benefits one gives up, and
the sacrifices one makes for making a choice constitutes the opportunity costs (Gillman,
2011). In summary, the opportunity cost is the cost of overlooking the opportunities that are
different options would have provided.
Although we compute many costs in monetary terms, it does not mean that we do not
incur expenses on the missed opportunities that we do not spend on. For instance, one may
not need to pay money to take a walk and enjoy the sunset, however, there might be an
opportunity cost. One could have earned some $100 doing some work during that time. One
can also use that time to read a book or visit a friend. All these are the opportunity costs of
deciding to take a walk. If you choose to pay $100,000 to pursue your MBA in a given
This study source was downloaded by 100000858663287 from CourseHero.com on 12-07-2022 15:17:52 GMT -06:00
https://www.coursehero.com/file/61962002/Order351060631-Economic-Conceptsdocx/
