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Opportunity Cost

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Occasionally, people experience dilemma in choosing a meal against another due to cost of the two types of food. In an average family set up two options of foods are available are a 2killogram packet of flour as well as 1killogram of rice. A mother stands at the supermarket shelf and compares the prices of the two very important meals. However, she finds that the cost of the two kilogram flour is 2$ while the 1kilogram rice is 1.5$. She chooses to settle for the two kilograms of flour at the expense of the one kilogram of rice. Thus the opportunity cost of purchasing the flour is 1.33. This implies that 2/1.5($) units of flour would be consumed at the expense of the forgone 1kilogram of rice.

Similarly, a parent with teenagers would choose to register the teenage children in the weekly tennis practices other than enrolling them for a movie show. The subscription cost of the tennis game practice is 10 dollars per month. On the other hand, the movie show monthly subscription is 5dollars. The parent chooses to have his teenage son practice acquire training on tennis other than watch movies repeatedly. The effects of this action are found to benefit the child later since they end up becoming expert players. However, considering the opportunity cost of attending the tennis training is 2 of watching a movie. This implies that two units (10/5$) of tennis training preferred at the expense of movies.

Business Decisions

Corporate societies require choices regarding the raw materials to purchase depending on their cost. Vast economic transformations in the ornaments industry are the returns found after sales of differently manufactured products. Ten kilograms of unrefined Jasper cost 1000$ while that of silver cost 1500$. After production jasper ornaments cost 10$ while a silver ring cost 20$. Companies manufacturing both of these ornaments make different amounts of returns. The silver makes more returns although few people often afford it. Therefore the company opts to manufacture and sell ore of the jasper type ornaments. Consequently, the opportunity cost of jasper is 0.5 (10/20$) silver ornament.

Business enterprises dealing with fast foods have varieties that are purchased at diverse prices. Small cakes mostly sold to school going children cost 20pennies and their sale is so numerous raging to at least 3000 pieces daily. The other larger cakes sell at 5$ each and at least 20 pieces are sold daily. The business opts to bake more of the small cakes although the returns are few. However, they target the children since they always buy cakes alongside juice and yoghurt. Thus, the opportunity cost of the small cakes is 0.0025 (0.02/500) larger cakes.

Government Spending

Moreover, the government spending was proposed to free high school as well as primary school education.  The free primary school would cost the government 30 million dollars while the free secondary education would be 50 million dollars. The choice made by government was primary school education since more children would acquire the basic education. Incase several students failed to join secondary school, they would enroll in technical colleges. Therefore, the trade-off cost for the primary school education would be 0.6 (30/50M$) units against high school education.

Government had to choose between leasing out a section of the national warehouses against retaining them. The suggested sale of cereals to private investors would cost 50bilion dollars while retaining it would be at no cost apart from the budgeted 10milion for maintenance. The option taken would affect the country’s future consumption as well as purchase price. This happens since private investors offer no subsidies so the government chose to retain all the ware houses. The opportunity cost of retaining the ware houses is 0.0002 (10million/50billion) dollars of the private investors. 

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