Relative Tradeoffs

Relative Tradeoffs

Relative Tradeoffs

Scarcity of resources is one of the more basic concepts of economics. Scarcity necessitates trade-offs, and trade-offs result in an opportunity cost. While the cost of a good or service often is thought of in monetary terms, the opportunity cost of a decision is based on what must be given up (the next best alternative) as a result of the decision. Any decision that involves a choice between two or more options has an opportunity cost.

Opportunity cost is useful when evaluating the cost and benefit of choices. It often is expressed in non-monetary terms. For example, if ...