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Opportunity Cost

Understand opportunity cost — the cost of the next best alternative foregone — with real-world examples and solved numerical problems.

Notes

Opportunity Cost

Class 11 Microeconomics — The Cost of the Next Best Alternative Foregone

What is Opportunity Cost?

Opportunity Cost
Opportunity Cost is the cost of the next best alternative foregone.
Example: Land used for a factory could have built houses. The cost of the factory is the houses foregone.

Identifying Opportunity Cost — The Salary Choice

Scenario: You work in a bank at ₹40,000/month and get two job offers. Click the alternative that represents the opportunity cost of staying in the bank:

Bank Job

₹ 40,000

Current Job

Consumer Choice Example

You have ₹40,000 — you can buy a laptop OR an LED TV. Choosing the laptop means foregone satisfaction from the TV. "Resources are limited — we are always forced to make choices."

Solved Practicals

Solved Example

Problem

Deepak works as a sales manager at ₹1,00,000/month. He gets offers of ₹70,000 (Reliance) and ₹85,000 (Tata). What is his opportunity cost?

Solution

₹85,000

Solved Example

Problem

A farmer produces 100 kg wheat or 70 kg rice with same resources. What is the OC of producing wheat?

Solution

70 kg of rice