1.

Explain the concept of opportunity cost by giving a suitable illustration.

Answer» Definition – Opportunity cost is the next best alternative foregone.The fundamental problem of economics is the issue of scarcity. Therefore we are concerned with the optimal use and distribution of these scarce resources. Wherever there is scarcity we are forced to make choices. If we have £20, we can spend it on an economic textbook, or we can enjoy a meal in a restaurant.If we spend that £20 on a textbook, the opportunity cost is the restaurant meal we cannot afford to pay.


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