Need help with opportunity cost in Economics...don't understand??

Question

I am having trouble understanding economics. I have come across a question which troubles me

here is the question:

Explain how the concept of opportuity cost is relevant in eachof the following situations:

a) A teenager deciding how to spend their weekly allowance
b)A student deciding whether to stay at home and revise for an examination or go out to a party.
c)An education board deciding whether to close down a small school in a remote area.
d)A government deciding whether or not to place more emphasis on protecting the environment.


i am just giving this as an example from my text book so i can get help from someone to understand this

please note it says that in these questions credit is given for correct use of english and for the good use of economic terms and phrases.

please help!

thanks

Answer 1

“Opportunity Cost” refers to the value of any resource (e.g., money) if committed to its next-best alternative.

For teenager deciding how to spend their weekly allowance, a spending decision would represent some value to him (movies, saving for IPod, birthday gift for girlfriend, etc). Presumably, the teenager would choose the option that yields the highest value to him. Each of the available choices would come with an “opportunity cost” however. The “opportunity cost” in this example would be the value of the next-best alternative foregone (e.g., the wrath of his girlfriend when she receives no birthday gift!)

Your other situations listed would also involve a trade-off of options (and hence an opportunity cost)…

In “study versus party” situation, the “opportunity cost” of attending the parting would be the adverse consequences of failing the example.

For the school board, the “opportunity cost” of keeping the rural school open may involve the cost of transporting students to another school in the nearest larger population center.

For the government, the “opportunity cost” of money spent on protecting the environment would be that the same money could otherwise be redirected to other social programs, military spending or debt reduction.

Answer 2

Opportunity cost is the opportunity foregone by using a resource for one purpose rather than others. You go to MCDonalds and want a burger and a sundae. Buy a cheese burger you can't have a cheese burger. The opportunity cost of the burger is the sundae.
a) Two things here. 1) if he spends it he can't save it for a better more expensive item latter on. 2) If he goes to the movies he can't go to the football. The opportunity cost of spending is saving. (you figure out the rest)

b)The opportunity cost of attending the party is better marks in the exam.

c) The government saves the money to spend elsewhere but has to spend more on either transporting these students to another school or on remote education.The opportunity cost of closing the school is having more money to spend elsewhere PLUS having to spend money on educating educating these students via other means.

d) How about you doing this one yourself. The above should make the concept clear.

Answer 3

a) because he has a limited allowance, he can only spend it on limited items. if he spends it on food, he'll have less for transport and other stuff, so he has to distribute it accordingly.

b) if the teenager does not go for the party, he misses out on the fun(opportunity cost) and spends the time on his studies. if he goes for the party, he misses out on his studies(opportunity cost).

c) the chance for the villagers to receive education, or a plot of land for other purposes.

d) by now, you ough to be able to apply the concept.