Opportunity Cost w/s 1.

Opportunity cost is defined as the cost of the next best alternative. When governments,
firms or individuals make decisions about how to use time, money, resources, labour etc there
were other options that they chose to forgo. This concept is applied throughout economics
and it is essential that you understand it.

1) Using diagram 1.41, answer the following

questions.
a) What is the opportunity cost of increasing
carrot production from 0 to 2 kg? 2kg of
potatoes
b) What is the opportunity cost of increasing
carrot production from 2 to 6kg? 6kg of
potatoes
c) What is the opportunity cost of increasing
potato production from 4 to 6 kg? 2kg of
carrots
d) How
many kg of potatoes can be produced if the economy is
producing 10kg of carrots?
No potatoes will be produced

e) Suggest why the possible output of carrots and

potatoes is proportional. (2marks)
this is because if you add a 5 onto the graph in between
6 and 4, the outputs of carrots and potatoes can be
proportional.

2) Using diagram 1.42, answer the following

questions.
a) What is the opportunity cost of increasing
aeroplane production from 10 to 15? 20 cars

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 b) What is the opportunity cost of increasing aeroplane production from 10 to 25? 60 cars
c) What is the opportunity cost of increasing car production from 80 to 100? 5
aeroplanes
d) Suggest why the economy has to forgo 20 cars for every 5 extra aeroplanes produced? (3
marks)
Maybe, this is because the cars are usually mass produced to be used by many people for
daily use as they drive to school, work, or any place else every day. Aeroplanes on the other
hand, are big and it uses up a lot of resources to be built and they are used for vacation or
long-distant business trips purposes, and you have to pay a lot to use aerolanes, so that’s why
the economy has to do this.

3) A government decides to increase its spending on healthcare. Define opportunity cost and
state how it applies to this decision. (4 marks)
Opportunity cost is the loss or the benefit that could have been enjoyed if the alternative choice
was chosen. It applies to this situation, because the government might halt the production on
something or lessen the spending on another factor, to increase the spending on health care.
This is opportunity cost because the government is losing something which could benefit them,
but instead they chose healthcare because it benefits the most in this situation.

4) Choosing to study IGCSE Economics has an opportunity cost. Explain this statement.
(2 marks)
The student choosing IGCSE Economics might have wanted to choose another subject, which
can be Biology. Biology does not benefit them as much as Economics for, maybe their future
career, so they went for Economics instead. The opportunity cost is the subject that was an
alternative to IGCSE Economics.

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