Question

What is the opportunity cost in this scenario? Gretchen earned $500 from her summer job. She made a list of things that she wants to do with the money she earned. She thought of spending $100 to buy a guitar amplifier, enrolling in a ballet class for $200, buying new clothes worth $100, and giving her mom a silver necklace worth $100. When she went to buy the amplifier, she found it cost around $150. She knew that she couldn’t change the fee for the dance classes. So she had to adjust the budget for her clothes or her mom’s gift. In the end, she decided she would buy one pair of jeans instead of the two pairs of jeans she had planned.

Answer 1

"In the end, she decided she would buy one pair of jeans instead of the two pairs of jeans she had planned."

Answer 2

Opportunity cost refers to a particular thing that is given up in order to acquire another thing. Choices have to be made and something has to be given up because resources are scarce. In the question given above, Gretchen gave up buying two jeans, she bought one instead so that she can buy a guitar amplifier. The jeans, which should have cost $50 that she gave up and did not buy is the opportunity cost in this case.