Question

economic literacy pearson

aut the med to betton Aome to be

Answer 1

This concept of upgrading school building is a concept of economics "trade-offs and choices". Due to limited resources and unlimited needs, individuals usually have to make choices: ie what to consume which would give the maximum utility. In this case, one of the alternatives is adopted and the rest are foregone. The concept of foregoing an alternative in order to consume or choose the best alternative is called opportunity cost.

In case of the school buildings being upgraded to be earthquake resistant, the funds would be required. These funds have opportunity cost because they can be put to multiple uses and it is important as to which use is the most efficient. If the school board decides to use these funds here, the other expenses are to be reduced. These could be the incomes of the teachers or the school staff, the other facilities provided to students or the scholarships. These would be the opportunity costs of the school when these funds are allocated to the use of building earthquake-resistant schools.

Another view could be that if these are government funded schools and the government is funding them, they would require more funding for the resistance, which would mean that either the school would have to forego other expenses as explained or the government would increase the funds. In such a case the government could increase the funds by either reducing the expenditure on other public facilities like roads, hospitals and public transport or could increase taxes, both of which would again have certain opportunity costs.

So the school board should devise plans in a way that the funds are put to best possible use and are efficiently allocated with least opportunity cost. This is what is the economic theory behind trade offs which is being represented in the question above.

(Comment in case of any doubts)