Suppose an agricultural labourer earns ₹400 per day in her village. Sh

Suppose an agricultural labourer earns ₹400 per day in her village. She gets a job to work as babysitter in a nearby town @ ₹700 per day. She chose to work as agricultural labourer. Which one of the following is the opportunity cost of the agricultural labourer?

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₹1,100

₹700

₹400

₹300

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Answer is Wrong!

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Opportunity cost is the cost of the next best alternative that is given up when a choice is made. In this scenario, the agricultural labourer has two options: earn ₹400 per day as an agricultural labourer or earn ₹700 per day as a babysitter. She chooses the agricultural labourer job. The opportunity cost of this choice is the income she foregoes by not taking the babysitting job, which is ₹700.

– Opportunity cost is the value of the forgone alternative.
– It is not the sum of the alternatives or the difference between them; it is the value of the single best alternative not chosen.

Understanding opportunity cost is fundamental in economics as it helps in analysing trade-offs and decision-making processes for individuals, firms, and governments. It highlights that resources are scarce, and choosing one option means giving up another.

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