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Q50 (CDS-I/2020) Economy › Basic Concepts & National Income › Opportunity cost Answer Verified

Suppose an agricultural laborer earns ? 400 per day in her village. She gets a job to work as a babysitter in a nearby town @ ? 700 per day. She chose to work as an agricultural laborer. Which one of the following is the opportunity cost of the agricultural laborer?

Result
Your answer: —  Â·  Correct: B
Explanation

Opportunity cost is defined as the value of the next best alternative that is foregone when a decision is made. In this scenario, the agricultural laborer has two choices: working in her village for ₹400 per day or working as a babysitter in a nearby town for ₹700 per day. By choosing to remain an agricultural laborer, she gives up the opportunity to earn the higher wage of ₹700. The opportunity cost is not the difference between the two wages, but rather the total value of the alternative that was not selected. Therefore, the opportunity cost of her decision to work in the village is the ₹700 she could have earned as a babysitter. This concept is fundamental in economics to measure the true cost of any choice in terms of lost opportunities.

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