Question

much. How might an economist evalijate this situation? 11. Explain how changes in opportunity costs can affect our choices and behavior.

Answer 1

The opportunity cost refers to the value of only a single best alternative forgone, thus is the loss of other alternatives when one alternative is chosen. Although is not entered in the accounting records however must be considered while making decisions. Thus while consumers make choices they will consider its opportunity cost. The higher the opportunity cost of doing an activity, the less likely it must be performed. When there is a change in the opportunity costs it affects incentives and choices, thus people re-evaluate their decision on choices and can pursue their choices based on the new situation.