1.3

Opportunity cost

Cambridge IGCSE Economics (0455)  · Unit 1: The basic economic problem  · 9 flashcards

Opportunity cost is topic 1.3 in the Cambridge IGCSE Economics (0455) syllabus , positioned in Unit 1 — The basic economic problem , alongside The nature of the economic problem, Factors of production and Production possibility curve.  In one line: The next best alternative foregone when making a choice.

This topic is examined in Paper 1 (multiple-choice) and Paper 2 (structured questions, including data-response items).

The deck below contains 9 flashcards — 3 definitions, 2 key concepts and 4 application cards — covering the precise wording mark schemes reward.  Use the 3 definition cards to lock down command-word answers (define, state), then move on to the concept and application cards to handle explain, describe and compare questions.

Key definition

Opportunity cost

The next best alternative foregone when making a choice.

Example: If you spend $10 on a movie ticket, the opportunity cost is what else you could have bought with that $10.

Questions this Opportunity cost deck will help you answer

Definition Flip

What is opportunity cost?

Answer Flip

The next best alternative foregone when making a choice.

Example: If you spend $10 on a movie ticket, the opportunity cost is what else you could have bought with that $10.
Key Concept Flip

Explain the relationship between opportunity cost and trade-offs.

Answer Flip

Trade-offs are the alternative options you face, and opportunity cost is the single best option you give up when making a choice. Trade-offs are considered, and opportunity cost is the value of the one not selected.

Definition Flip

How does the concept of 'foregone' relate to opportunity cost?

Answer Flip

'Foregone' means 'given up.' Opportunity cost is what is foregone when a decision is made. It's the value of the next best thing you didn't choose.

Key Concept Flip

Explain how opportunity cost affects decision-making.

Answer Flip

Opportunity cost encourages rational decision-making. By considering what is being given up, individuals and firms can make more informed choices about resource allocation.

Key Concept Flip

Give an example of opportunity cost in a production decision for a business.

Answer Flip

A farmer can grow wheat or barley. If they choose to grow wheat, the opportunity cost is the potential profit they could have made from growing barley instead.

Key Concept Flip

How does scarcity influence opportunity cost?

Answer Flip

Scarcity forces us to make choices. Because resources are limited, every choice has an opportunity cost, as we must forgo something else.

Key Concept Flip

Explain the concept of opportunity cost in the context of government spending.

Answer Flip

If a government spends more on healthcare, the opportunity cost might be less funding available for education or infrastructure projects. The government must decide what to forgo.

Definition Flip

Define 'next best alternative' in relation to opportunity cost.

Answer Flip

The 'next best alternative' is the option that was most desirable but not chosen. Its value represents the opportunity cost of the chosen option.

Key Concept Flip

How can understanding opportunity cost lead to better choices?

Answer Flip

Understanding it helps by making people conscious of the real cost of their choices, leading them to select options that provide the highest net benefit after accounting for what is given up.

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1.2 Factors of production 1.4 Production possibility curve

Key Questions: Opportunity cost

What is opportunity cost?

The next best alternative foregone when making a choice.

Example: If you spend $10 on a movie ticket, the opportunity cost is what else you could have bought with that $10.
How does the concept of 'foregone' relate to opportunity cost?

'Foregone' means 'given up.' Opportunity cost is what is foregone when a decision is made. It's the value of the next best thing you didn't choose.

Define 'next best alternative' in relation to opportunity cost.

The 'next best alternative' is the option that was most desirable but not chosen. Its value represents the opportunity cost of the chosen option.

More topics in Unit 1 — The basic economic problem

Opportunity cost sits alongside these Economics decks in the same syllabus unit. Each uses the same spaced-repetition system, so progress in one informs the next.

1.1 The nature of the economic problem

9 flashcards
1.2 Factors of production

9 flashcards
1.4 Production possibility curve

9 flashcards

Cambridge syllabus keywords to use in your answers

These are the official Cambridge 0455 terms tagged to this section. Mark schemes credit responses that use the exact term — weave them into your answers verbatim rather than paraphrasing.

opportunity cost next best alternative foregone trade-off choice decision making

Key terms covered in this Opportunity cost deck

Every term below is defined in the flashcards above. Use the list as a quick recall test before your exam — if you can't define one of these in your own words, flip back to that card.

Opportunity cost
How does the concept of 'foregone' relate to opportunity cost
'next best alternative' in relation to opportunity cost

How to study this Opportunity cost deck

Start in Study Mode, attempt each card before flipping, then rate Hard, Okay or Easy. Cards you rate Hard come back within a day; cards you rate Easy push out to weeks. Your progress is saved in your browser, so come back daily for 5–10 minute reviews until every card reads Mastered.