The Concept of Opportunity Cost
Opportunity cost is often to be determined when coming across decision-making. Throughout this essay, the term ‘opportunity cost’ will be reviewed in the case of pregnant women staying home during their maternity leave. The essay will be divided into 3 part. Firstly, concept of opportunity cost will be defined and explained with daily examples. It will then go on investigating both the opportunity cost and benefits of mothers staying home during their maternal leave. Finally, several advices will be given to lessen mothers’ burden in childcare costs, which the childcare cost is assumed to be equal or even exceed the maternity payment.
Concept of opportunity cost is one of the main microeconomics theory in describing relationship between scarcity and choice (Buchanan,2008). Opportunity cost is generally defined as the highest-value option forgone, which is the cost of an alternative that have to be forgone in order to pursue a certain action. This term is firstly devised by Austrian economist Friedrich von Wieser in 1914 that regard the cost of giving up alternative choice when an option has been decided. Opportunity cost is about making choices between several mutually exclusive alternatives under a scarcity situation (Magnus & Milton C., 1993). From an economic point of view, since resources are scarce relative to needs, the use of resources in one way prevents their use in other ways (Sloman, 2013). In others words, whenever a decision has been made, it has to be given up the benefit of alternative choices. This mean the benefits of the highest-valued option forsaken could have received by taking an alternative action is counted as the opportunity cost.
Taking crop choice of a farmer as an example, it is given that size of a farmland is fixed, which its amount of output is limited. If the farmer decides to grow wheat, his opportunity cost will be the alternative crop that might have been grown like rice, potatoes and corns instead. Another example will be the
Concept of opportunity cost is one of the main microeconomics theory in describing relationship between scarcity and choice (Buchanan,2008). Opportunity cost is generally defined as the highest-value option forgone, which is the cost of an alternative that have to be forgone in order to pursue a certain action. This term is firstly devised by Austrian economist Friedrich von Wieser in 1914 that regard the cost of giving up alternative choice when an option has been decided. Opportunity cost is about making choices between several mutually exclusive alternatives under a scarcity situation (Magnus & Milton C., 1993). From an economic point of view, since resources are scarce relative to needs, the use of resources in one way prevents their use in other ways (Sloman, 2013). In others words, whenever a decision has been made, it has to be given up the benefit of alternative choices. This mean the benefits of the highest-valued option forsaken could have received by taking an alternative action is counted as the opportunity cost.
Taking crop choice of a farmer as an example, it is given that size of a farmland is fixed, which its amount of output is limited. If the farmer decides to grow wheat, his opportunity cost will be the alternative crop that might have been grown like rice, potatoes and corns instead. Another example will be the