Economics is the study of the allocation of scarce resources.Because all resources are scarce, people must make decisions as to how each resource is used. Generally, there are multiple uses to which a resource can be applied. I can use my labor to cook dinner, work at a job, fix my car or work in the garden. But if I do one, I cannot do the others at the same time. The cost of forfeiting the benefit of completing one of those options is opportunity cost. Suppose I decide in the end to use my labor to fix my car. That necessarily means that the benefit I would have received from the other options is less than the benefit of fixing my car. In other words, the opportunity cost of not fixing my car is highest of the alternatives.Since economics is the study of the allocation of scarce resources, it makes sense to use opportunity cost as a means of explaining the relative values people apply to various alternatives
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