Opportunity Cost

Abstract

In Chapter One it was noted that the problem of scarcity led to that of choice, i.e. as all wants cannot be met at any one time, society has to choose how to allocate scarce resources between competing uses. Hence, the production of more of one good implies that less of another can be made. Thus the real cost of producing a good can be measured in terms of the forgone opportunity of producing something else. This important concept is called opportunity or alternative cost.