Opportunity Cost

This note will break down how to Caluclate Opportunity Cost and the various types of Opportunity Cost.

Edu Level: Unit1

Date: Mar 31 2026 - 11:40 AM

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$$ Opportunity \space Cost = \cfrac{Change \space in \space Y}{Change \space in \space X} $$

There are three types:

As the country moves from point A to point B, 3 Units of Good Y is sacrificed to obtain 1 unit of Good X.

Additionally, as the country movies from point B to point C, 3 units of Good Y is sacrificed to obtain 1 unity of Good X.

Therefore, the diagram represents a contant Opportunity Cost.

For every consecutive increase in the production of good X from point A to point B to point C to point D, less and less of good Y is sacrificed.

This implies decreasing opportunity cost or increasing returns to scales.

This implies increasing opportunity cost of decreasing returns to scale.

This is because the country moves from point A to point B to point C to point D to E to F to G.

For every consecutive decrease in the production of good Y, less and less extra of good X is produced.

CORRECT ANSWER: Going Bowling with his Friends.

John chooses to do his homework instead of going bowling with his friends. What is the Opportunity Cost?

CORRECT ANSWER: The Aloo Pie

Emily decides to buy a doubles instead of an Aloo Pie. What is the Opportunity Cost?

CORRECT ANSWER: Attending Economics Lessons Class

Luke decides to take his girlfriend on a date instead of attending his Economics Lessons Class. What is the Opportunity Cost?