Opportunity Cost

In economics, “there is no such thing as a free lunch!” Even if we are not asked to pay money for something, scarce resources are used up in production and there is an opportunity cost involved.

Exam hint:

Students frequently use the concept of opportunity cost as part of their evaluation – but you won’t get much credit for it unless you give a sensible application of what might have been ‘given up’. For example, it is better to write “Should the government choose to increase spending on higher education, then the opportunity cost may be that there is less money available to spend on primary or secondary education, if the government doesn’t borrow more” than writing “Should the government choose to increase spending on higher education then there might be an opportunity cost”.