CS economics today we have to discuss about the opportunity cost opportunity cost in easy words if I defined opportunity cost is the cost of choice the next best Alternatives foregone if we talk about in the microeconomic theory the opportunity cost of a particular activity is the value or the benefit giving or the given up by engaging in that activity relative to engage in the alternative activity if you have a two options product a product B and if you select the product B the product a would be your opportunity cost the second or the next best alternative for gone or the choice you make and the cost of this choice you are making known as opportunity cost it means if you choose one activity you are giving up the opportunity to do a different options for example suppose that a person is having a rupees fifty thousand in his in his hand and he has the option to keep it with himself at home or deposit it into the bank of course that will further generate four percent of interest rate so now the opportunity cost of keeping money at home we are just assuming that that he preferred to you know keep money at home for example two thousand per year as opposed to bank so if you have options for example if you are going outside and you have options two options the option one is either you have you can try T and you can try coffee and if you prefer that uh I should and I am going for uh for example coffee the T would be your cost or the cost you make a choice you prefer coffee that time the tea would be your cost opportunity we have a different kind of cost opportunities at a different level for example uh from the consumer point of view we are just assuming that the consumer have two options either to either to buy laptop or the mobile we are just assuming that that he preferred to purchase a laptop then purchase of mobile would be its opportunity cost if we talk about from the government perspective government also has a two options the first one either to provide subsidies to the firms or give a grant to local schools again we are just assuming that that government has Preferred to you know give the grants to local schools and if they are giving grants to the Local Schools then the subsidies to the firms would be their opportunity cost and if we talk about from the business point of view or the business level uh let's say business also has a two options either to use a business labor to produce a food or to produce the textile products again we are assuming that that they they produce or they prefer to you know use the labor to produce or to produce the foods then the production of the textile would be known as their opportunity cost if you have an options to either to watch a football match or the cricket match you prefer to watch the football match then the cricket match would be your opportunity cost let's take an example uh in the order to get more clear and the comprehensive understanding about the opportunity cost uh we have an options uh let's say when we choose something over the other the choice that was given up is uh also known as opportunity cost as we already discussed opportunity cause if we Define the next best alternative keep that in mind the next best Autumn native that is sacrificed or forgone in order to satisfy the other one ah you have to decide whether to stay up and study or go to the bed and not to study we are assuming that that you have an options either to stay up and steady or to go to the bed and not to study if you choose to go to bed the knowledge and the preparation you could have gained by choosing to stay up and the studies become your opportunity cost let's say from the production point of view we have a different situations uh the situation A that we have to produce two uh Goods the goods a and the goods b in a situations we are spending our money on on the production of the goods B and we are producing none on um production of goods a in the second uh in the second situation we are you know producing one more unit and because of this one unit we have to reduce some units from you know a good B now that's become 80 uh from the 100. if we move into the situation C now we uh prefer to you know uh produce uh for example two goods a now what's happened next that if we are producing uh two units of good day now we have a situation that we have to reduce more units of good B now we are at uh 70. as we move ahead uh to the situation D now we are preferring that we have to produce units of good a which is three because of these circumstances now we further has to reduce we have to reduce the unit of good B now till 40. as we have an options again e uh we are producing the number of uh you know the four number of the unit of good a now we have to reduce the unit of good speed to uh 30. same uh when we reached up to the number of units which are a which are 5 the units of goods B become 0. so if you move on to the third column which are the opportunity cost of the good day when we were spending done or good a and we were getting a unit of good B we uh don't have an opportunity cost but as uh we are making a choices uh we have decided to you know put or to produce the unit of good a which one was one how much we have to detect we have to detect 20 of uh you know unit of goods from uh total production now these are 20 deductions from the 100 now becomes our opportunity cost of the good this is opportunity cost of the good not the B this is uh something mistakenly by written so uh as we are moving ahead from the C D E F now you can see that uh whatever the directions we are making from the total Productions the remaining numbers or the directions numbers become are the opportunity cost so uh if if we have an options you know what would you buy with you know 100 USD dollar this is just our questions and if you have an option you can buy this this if you select one the next one become your opportunity cost how should the government spend 250 million dollar now the spending that the government has options that they they can spend there there on that these are something if you uh spend money on the one choice the next would become your opportunity cost the next thing we have is the production possibility curve if you see the production possibility curve is something or a curve depicting the various combination of the two products or two types of product that can be produced when all the available resources are fully and efficiently employed because the resource are scarce and have alternative uses a decision to devote more resources to producing one product mean uh fever resources are available to produce other Goods so uh if I Define in a simple words a production possibility curve diagram shows that that there is a maximum combination of two goods that can be produced by an economy with all the available resources production possibility curve which is also known as PPC shows the maximum combination output of two or the more product a firm or the entire economy can produce with its available resources the resources are being used efficiently if they are producing their maximum output but because the resources as we already know are limited producing more of one product mean producing less of another PPC are therefore a useful way of showing the opportunity cost of producing more of the one product in terms of how much another must another one must be given up as in this uh slides we are taking in the previous example uh where we were we have a different situation A B C D E F uh we were producing a a product a and product B so we have our situations now you can see from the PPC diagram in the first here you can see when we were producing ah zero unit of good a now you can see we were producing hundred so in in that case uh we don't have an opportunity cost but when we make a choice that we prefer that we should produce the number of unit of good a and we prefer that there should be at least one unit of group good a should be produced against that what happened next that we ultimately don't have options but to reach reduce 20 unit of goods p in third case which is C uh situation we were producing uh two units of good a ultimately we have to reduce 30 or the 10 unit of um the you of the good speed in Situation Number Four which is D we were producing three uh three units of the good a and we have to remove we have to reduce a more 30 units of the product B and from E uh we were producing number of four and we have to reduce the unit of goods till uh 30. and fifth we were producing five but we don't have uh you know the production of the unit of the good B so here is an uh diagram uh which you can see uh that how production of possibility curves indicates the number of choices we are making now in in this diagram you can see that uh in situation away we were spending 0 and we were producing uh zero unit of good a the production of the unit of B at a high level which is 100 as we uh you know prefer to produce more number of unit of good a uh what happened that the unit of good B reducing and reducing to zero if we talk about that what is the uh you know the concern of OC and the PPC uh or how PPC indicate the OC we already have an options between uh either to produce units of good a or the units of good B now if you see that uh when we were we have decided to produce uh you know uh or when we move from situation A to B zero to one now you can see that um because of uh this change the cost of a cost opportunity cost of the goods is also changed as we are moving from one to two two to three three to four and four to five you can see that the unit of uh unit of Productions of good B reducing according to the or as we increase the unit of the goods B so uh how we can find the opportunity cost or on or we can show it on the PPC diagram we haven't we have enough formula uh which can be helpful for all of you guys while uh solving your mcqs paper so we have an options or we have an uh formula uh you know the opportunity cost of the good a on a PPC the formula is that change in the good B uh divided by change in the good a so this is a Formula you just have to remember uh you can get some situation which where you have you might be uh to to find out the opportunity cost of any good while they may give you some kind of a