Find the missing step in this chain:
Resources of the economy are scarce → [ ? ] → There is a cost of having a little more of one good in terms of the other good
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Using more resources for corn leaves fewer resources for cotton
Because resources are scarce, the same resources cannot be used for both goods. Putting more of them into corn leaves fewer for cotton.
So more corn means less cotton, and the cotton given up is the cost of the extra corn: its opportunity cost.
NCERT (2026-27): “Production Possibility Frontier … If more of the scarce resources are used in the production of corn, less resources are available for the production of cotton and vice versa. Therefore, if we want to have more of one of the goods, we will have less of the other good. Thus, there is always a cost of having a little more of one good in terms of the amount of the other good that has to be forgone. This is known as the opportunity cost of an additional unit of the goods.” |