OPPORTUNITY COST OF STUDYING ECONOMICS – Activity 2

1. It is Saturday, and Mpho decides to attend a soccer league match which costs her R250 and takes up two hours of her time. If she had not attended the soccer match, she would have read a couple of magazines.

Her opportunity cost to attend the soccer league match is:

It is correct.

She pays R250 for the match and loses the value of reading her magazines. The R250, plus the satisfaction of reading magazines, is her opportunity cost.

Think again.

Opportunity cost is a broader concept than simply the amount Mpho have to pay, because it also includes the best alternative that she gave you have to give up in order to do what she is doing.

She pays R250 for the match and loses the value of reading her magazines. The R250, plus the satisfaction lost of not reading magazines, is her opportunity cost.

Think again.

She pays R250 for the match and loses the value of reading her magazines. The R250, plus the satisfaction lost of reading magazines, is her opportunity cost.

Think again

Opportunity cost also apply to recreational activities. In this case Mpho had to make a decision about which recreational activities to do.  Her choice is to go to the match and her opportunity cost is the R250 she pays for the match plus the satisfaction lost of not reading her magazines.

2. It is Saturday, and Peter decides to attend a soccer league match which costs him R250 and takes up two hours of his time. He is supposed to mow the lawn, but decides to hire someone to do it at R50 per hour while he is at the soccer match. It will take two hours to mow the lawn.

His opportunity cost to attend the soccer league match is:

Think again.

His opportunity cost must now also includes the R100 he pays for someone to mow the lawn.

His opportunity cost is the R250 for the soccer match and the R100 he pays for someone to mow the lawn.

Think again.

She pays R250 for the match and loses the value of reading her magazines. The R250, plus the satisfaction lost of reading magazines, is her opportunity cost.

It is correct.

His opportunity cost is the R250 for the soccer match and the R100 he pays for someone to mow the lawn.

3. Glenda works as a consultant and earns R500 per hour. It is Saturday, and she decides to attend a soccer league match instead of working. The cost of the soccer match is R250 and it takes up two hours of her time.

Her opportunity cost to attend the soccer match is:

Think again.

She needs to include the earning lost of R 1 000.

Her opportunity cost is therefore equal to the R250 for the soccer match and the R1 000 she loses by not working.

Think again.

She needs to include the cost of the soccer match of R250.

Her opportunity cost is therefore equal to the R250 for the soccer match and the R1 000 she loses by not working

She needs to include the cost of the soccer match of R250.

Her opportunity cost is therefore  equal to the R250 for the soccer match and the R1 000 she loses by not working