Opportunity Cost
w/s 1.4
Opportunity cost is defined as the cost of the next best alternative. When governments,
firms or individuals make decisions about how to use time, money, resources, labour etc there
were other options that they chose to forgo. This concept is applied throughout economics
and it is essential that you understand it.
1) Using diagram 1.41, answer the following
questions.
a) What is the opportunity cost of increasing carrot
production from 0 to 2 kg?
___________
b) What is the opportunity cost of increasing carrot
production from 2 to 6kg?
___________
c) What is the opportunity cost of increasing potato
production from 4 to 6 kg?
___________
d) How many kg of potatoes can be produced
if the economy is producing 10kg of
carrots?______
potatoes is proportional.
e) Suggest why the possible output of carrots and
(2marks)
2) Using diagram 1.42, answer the following
questions.
a) What is the opportunity cost of increasing
aeroplane production from 10 to 15? ___________
b) What is the opportunity cost of increasing
aeroplane production from 10 to 25? ___________
c) What is the opportunity cost of increasing car
production from 80 to 100?
___________
d) Suggest why the economy has to forgo 20 cars
for every 5 extra aeroplanes produced? (3 marks)
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3) A government decides to increase its spending on healthcare. Define opportunity cost and
state how it applies to this decision.
(4 marks)
4) Choosing to study IGCSE Economics has an opportunity cost. Explain this statement.
(2 marks)
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