Basic Economic Problem · 3 question types
Past paper frequency (2018 to 2024)
This topic accounts for approximately 14% of your exam marks.
Opportunity cost and scarcity definitions appear on nearly every paper; consistently 4 to 6 marks in Q1 Part A context questions.
Scarcity forces choices; choices have a cost. That cost is opportunity cost.
Opportunity cost is the next best alternative forgone when a choice is made between competing uses of scarce resources.
Two parts of the definition matter equally:
A definition that just says "the cost of a decision" without "next best alternative forgone" loses marks.
Opportunity cost can be measured in anything sacrificed: time, the satisfaction of an alternative product, lost income, the next best use of a piece of land. A pure-money figure (e.g. "£50") is almost never the correct opportunity cost in an MCQ.
| Choice made | Opportunity cost |
|---|---|
| Buy a new phone with £600 | The next best item that £600 could have bought (for example a holiday) |
| Spend an evening revising | The next best use of that evening (for example watching a film) |
| Government builds a hospital with tax revenue | The next best public project that tax revenue could have funded (for example a road) |
| Firm uses a field to grow wheat | The next best crop the field could have grown (for example barley) |
| Worker stays in the same job | The next best job they could have taken (with its own pay and conditions) |