Opportunity Costs
The occurrence of natural disasters often sees the economic situation to be not doing so well. Referring to Hurricane Sandy as an example, the cost of Hurricane Sandy has been estimated to be worth a single day's GDP which is approximately $50 billion. Half of the $50 billion is being incurred for recovery and half of it is being incurred for lost production. This is an example of opportunity cost because the funds which were supposedly meant for further investments would now have been spent on the recovery from the damage. Farmers would have to forgo their plans of upgrading their machines due to limited budget in order to repair the utilities of the farm.
Decisions have to be made
The occurrence of natural disasters often sees the economic situation to be not doing so well. Referring to Hurricane Sandy as an example, the cost of Hurricane Sandy has been estimated to be worth a single day's GDP which is approximately $50 billion. Half of the $50 billion is being incurred for recovery and half of it is being incurred for lost production. This is an example of opportunity cost because the funds which were supposedly meant for further investments would now have been spent on the recovery from the damage. Farmers would have to forgo their plans of upgrading their machines due to limited budget in order to repair the utilities of the farm.
Decisions have to be made
Decisions have to be
made every time even if we do not like it. From a simple decision of what to
eat to a tougher decision that will affect our lives such as what job is
suitable for us. Each and every one of
us has to make a decision and without realising, our decision making is somehow
related to an economics concept.
A good example of a decision related to an economics concept will be:
A good example of a decision related to an economics concept will be:
You can’t choose both
either to study or watch television. If you decide to STUDY, your
opportunity cost will be WATCHING TELEVISION. And
if you choose WATCHING
TELEVISION, your opportunity
cost will
be STUDYING.
Human
wants are always unlimited and cannot be always fulfilled. But as we all know,
the resources are limited. People will always say that they are grateful and
happy with what they have but there are
more that they want to have.
For example, you desire
for more CASH,
because you do not have enough. Cash is the resources. In this case, you are
actually facing SCARCITY. Scarcity arises when people desire more
things than what the resources can supply.
Choices
have to be made. As a human being, we have to be rational while making choices
in order to make the best choice. Individual will obviously make choices which
will
maximise their
satisfaction.
Written by : Adelynn Yeo Qin Qing (0315293)
Reference :
1) http://realmoney.thestreet.com/articles/11/01/2012/hurricane-sandys-opportunity-costs
Love how you give examples so we can understand better! Great job, keep it up!! :)
ReplyDeleteGood job! Explanations are very detailed. :)
ReplyDeleteGreat job don
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