EC211 · LESSON 01 / 08

1. Choice and opportunity cost

You have two hours this evening for paid work, studying, or rest. You cannot devote the same two hours fully to all three.

Understand

What is this lesson explaining?

Scarcity means resources cannot satisfy every desired use; it does not require poverty. Microeconomics studies individual and firm choices under constraints. Macroeconomics studies aggregates such as national output and unemployment.

Opportunity cost is the value of the best alternative forgone, not the sum of every rejected alternative. It includes your time and resources even when no cash payment occurs.

KEY MODEL

Net marginal benefit = MB − MC

ScarcityLimited resources relative to desired usesOCValue of the best forgone alternativeMarginalThe increment from one more unit

See it on a graph

The graph is right here

Read the axes and original point first. Then change one value at a time and watch the curve or point move.

Production possibilities frontierMore of one thing requires giving up another

Quick check

NO TYPING

Your spare room could earn 3,000 baht net rent per month. What is the monthly opportunity cost of using it for your own work?

Takeaway

Remember these two ideas

✓

Suppose studying for two hours rules out a job paying 240 baht net or rest valued at 150 baht. The best forgone alternative is the job.

Common mix-upNo cash payment does not mean no economic cost.

Assumptions and sources

Compare feasible alternatives over the same time period and avoid counting a cost twice.

Pindyck & Rubinfeld, Microeconomics, 9th Global Edition, ch. 1, 7, pp. 26, 238 (PDF 28, 240); original examples and questions.