Topic Three (1.3): Opportunity Costs

Introduction

This topic’s big question is: What is opportunity cost?

What do I need to know?

• The definition of opportunity cost and examples from different contexts

Read

This topic covers pages 10-13 of your coursebook. Start by reading your book so that you have a basic understanding and then complete the following activities:

Tasks

Recap question: What is meant by ‘the economic problem’?

The existence of the economic problem means that we have to make choices. As resources are scarce, the selection of one choice often results in the loss of another.

This is called…opportunity cost - the next best alternative forgone (given up) when making an economic decision.

Start by watching this YouTube video about Opportunity Cost Definition and Real World Examples:

Interact

Complete the following worksheet on opportunity cost:

COMPLETE – Topic 1.3 Worksheet Download COMPLETE – Topic 1.3 Worksheet

Tasks

Life on Land

Investigate the causes and effects of deforestation in the Amazonian rainforest.

What are the possible opportunity costs of this deforestation?

READ – Deforestation (NASA) Links to an external site.

Extension

Written question – Paper 2

Explain how the concept of opportunity cost can influence the decision-making of a car manufacturer. (4 marks)