Every economic decision involves trade-
Trade-offs are the alternative choices
people face in making an economic
Opportunity cost is the cost of the next
best alternative choice. The opportunity
cost is the money, time or resources a
person gives up, for the final choice.
What is the
opportunity cost of
the War in Iraq?
opportunity cost. It
combinations of goods
and/ or services that
can be produced when
resources are used.
The line of the graph represents the full potential
(aka frontier) of economy employing all
Uses of the Production Possibilities Diagram:
Identifying possible alternatives to putting the
best resources into production
Idle resources lead
to failure to reach full
larger labor force,
a new frontier.