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Question

Difficulty: MediumScarcity and Choice

A consumer has a fixed budget of ₦20,000 and urgently requires both a modern economic textbook and a scientific calculator, each priced at ₦20,000. If the consumer decides to purchase the economic textbook, what is the real cost of this choice?

  1. A
    The sum of ₦20,000 paid for the textbook
  2. The scientific calculator foregoneAnswer
  3. C
    The satisfaction derived from reading the textbook
  4. D
    The combined financial value of both items

Answer

The scientific calculator foregone
In economics, the real cost (or opportunity cost) of an action is the alternative good or service given up when a choice is made under conditions of scarcity. Since the consumer opted to purchase the textbook, the scientific calculator represents the foregone alternative and thus constitutes the real cost.

Step-by-Step Solution

1
Identify the fundamental economic problem presented in the scenario
Scarcity of resources (fixed budget of ₦20,000) relative to unlimited wants (textbook and calculator total ₦40,000).
Limited resources force the consumer to make a choice.
2
Distinguish between money cost and real cost
Money cost is the cash price paid (₦20,000), while real cost (opportunity cost) is the alternative item foregone.
Economics defines real cost in terms of sacrificed alternatives rather than monetary expenditure.
3
Determine the foregone alternative based on the choice made
Choosing the textbook means sacrificing the scientific calculator.
The scientific calculator is the next best alternative given up.

Key Concept

Real Cost (Opportunity Cost)
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Topics

Scarcity and Choice

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