Explain opportunity cost

Opportunity cost is the cost of sacrificing the next best alternative to the activity under consideration. In order to explain this I will use a literal example. You are going to watch a football match. There are two tiers of tickets, the cheaper ticket is £25 and the more expensive ticket is £30. The reason for the difference in ticket prices is due to a difference in view of the pitch. The more expensive ticket has a better view of the pitch and the cheaper a worse view. There are also refreshments available at the stadium which cost £5 each. You are given a budget of £30. One option is to pay £30 for the more expensive ticket for the better view, here what you are sacrificing is the ability to buy a refreshment because you have spent all your budget on the ticket and so the opportunity cost here is the refreshment. Whereas, another option is that you spend £25 on the cheaper ticket with the worse view of the pitch but have £5 left of the budget to spend on buying a refreshment, here you are able to buy a refreshment but because you spend less on the ticket you get a worse view of the pitch and so the opportunity cost here is the better view of the pitch.

Answered by Edward H. Economics tutor

1980 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

What is meant by the term 'opportunity cost'


With the help of a diagram, outline the long run effects of the coronavirus pandemic on the United Kingdom if there is no government intervention


Explain how government policies can reduce the natural rate of unemployment


How can I improve my "chain of reasoning" when explaining answers so I can achieve full marks for analysis (KAA)?


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences