Explain the influence of opportunity cost on consumers’ decisions.
Logical explanation which might include:
Opportunity cost is the (next) best alternative (1)
forgone / sacrificed (1).
Consumers have limited income / time (1) have to
make choices (1) cannot have everything they want (1)
if buy more of one product may have to buy less of
another / example of what product may be given up to
buy another product (1).
Opportunity cost is the cost of next best alternative foregone. Since consumers have limited
income and unlimited needs and wants, it implies there is scarcity of resources available
to satisfy their needs and wants. This allows them to make choices. If a house hold spends
on education, they will have to forego a vacation. The opportunity cost of spending on
education is the vacation that was foregone instead