Opportunity Costs

When we make a choice about how to use our resources (such as

our time or money), we need to weigh up which option would give
us the most benefit. When we make a decision to go with Option
A as our best option, the next best option that we chose to turn
down, Option B, is the opportunity cost. Opportunity cost is the
next best alternative, foregone or, in other words, the next
best alternative that we chose to miss out on.

What is the opportunity cost in these situations?

1. You have birthday money to spend and can’t decide whether to buy a new game for
your X-box or a new pair of runners. You really want both but you don’t have enough
money and need to make a choice.
What will you choose to buy? _________________________________
What is the opportunity cost? ________________________________

2. When visiting your Grandma, she offers you afternoon tea of either cake or biscuits.
You can’t have both because she needs to save some for her next visitors.
What is your choice? _______________________________________
What is the opportunity cost? ________________________________

3. Your family are planning a holiday to Queensland. You can either go to Dreamworld and
other theme parks on the Gold Coast, or go snorkelling on the Great Barrier Reef.
There is not enough time or money to do both.
What is your choice? ________________________________________________
What is the opportunity cost? _________________________________________

4. You have $20 to go to the movies. The movie you want to see would be fantastic in 3-
D, but it costs $20 for a ticket in the BigMax 3-DTheatre. A ticket to the regular
cinema will cost $10. Popcorn at the cinema costs $5 and drinks cost $5. You really,
really want to see the 3-D movie but would also like to have snacks to enjoy while
watching it.
What is your choice? ________________________________________________
What is the opportunity cost? _________________________________________

5. There is a vacant block of land that the local council is looking at developing. There are
several options that would be good for the block, including building a skate park for
young people or developing a community garden. They decide to develop the community
garden.
What is the opportunity cost? _________________________________________
 SUPPLY and DEMAND

Demand

When many people (consumers) want something, demand for that good or service is high.

When few people (consumers) want something, demand for that good or service is low.

Supply

Price

The price must be right for producers and consumers to be happy.

If the price is too high, consumers won’t buy the good or use the service.

If the price is too low, then producers won’t make a profit and might go out of business.

emand for a good or service is high, supply from the producer or businesses also needs to be
high to avoid a shortage.

When demand for a good or service is low, producers need to adjust their business. If they
provide too much of the good or service,