Article by: Vincent Njoroge |
Last Modified: 2017-02-24 15:26:44
Scarcity is demonstrated when demand for goods and services is more than the process or resources needed to fulfill them ("OpenStax CNX", 2016). Opportunity costs on the other hand has to do with the forgone advantages or enhancements in pursuit of perceived better chances of improvement. An example of opportunity cost is where an employee quits job to pursue higher education. The salary and benefits lost from quitting job can be considered as the opportunity cost.
A personal example of opportunity cost is when I had to resign a pensionable government job to pursue another job in a foreign country. Part of the new job requirement was a letter from my previous employer stating that I was free from all obligations. This meant loosing salary of about $2,700 for a period of three months. Additionally, I had to go through the inconveniences of leaving my country to start a new life and being away from family.
On a macro level, when government make decisions such investing in free education schemes, the opportunity costs may include increased taxation to foot the new increased bill. Optionally, subsidies on other sectors may be withdrawn to help fund the new scheme.
OpenStax CNX. (2016). Cnx.org. Retrieved 28 January 2017, from http://email@example.com
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