opportunity cost

Question

How opportunity cost is raised by human wants?

Answer 1

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As human wants are unlimited but resources are limited, we will never be able to satisfy all our wants. This means that we have to make choices. We have to decide how to spend each unit of resource to satisfy our wants. As resources have alternative uses, we must forgo some wants while satisfying others. This raises opportunity cost, which is defined in terms of the highest valued option forgone.

Source(s): CE ECON Syllabus

Answer 2

Cost is the highest-valued option forgone, that is, cost exists when not all options can be taken and some are sacrificed for the others. Due to scarcity, resources are not enough relative to our unlimited wants even in a one-man economy, and one has to make choice on what want to satisfy and what to give up. So sacrifice occurs and opportunity cost exists.