1. AS Business Studies
Opportunity Cost

2. ● Understand the concept of opportunity
cost.
● Identify opportunity cost in different
scenarios.
● Devise your own scenarios for
opportunity costs
LO

3. (Dictionary.com)
The cost of an alternative that must be forgone in order to pursue a certain action. Put another way,
the benefits you could have received by taking an alternative action.
What is Opportunity Cost?

4. The opportunity cost of going to
University is the money you would have
earned if you worked instead. On the
one hand, you lose 3-4 years of salary
while getting your degree; on the other
hand, you hope to earn more during
your career, thanks to your education,
to compensate for the lost wages.
Example 1

5. Here's another example: if a gardener decides to
grow carrots, his or her opportunity cost is the
alternative crop that might have been grown
instead (potatoes, tomatoes, pumpkins, etc.)
In both cases, a choice between two options must
be made. It would be an easy decision if you
knew the end outcome; however, the risk that
you could achieve greater "benefits" (be they
monetary or otherwise) with another option is the
opportunity cost.
Example 2

6. http://www|.investopedia.com/video/play
/opportunity-cost/
Watch this Video.

7. Mark decides to leave his job as a
Bank Manager and set up a
franchise
What is his opportunity cost?
Task 1 - Try to work out the
opportunity Cost

8. Sheila spends her start-up
marketing budget of £15,000 on a
direct mailing campaign
What is her opportunity cost?
Scenario 2

9. To finance his start-up, Gavin
takes out a £100,000 bank loan
on which interest of 10% will be
paid
What is his opportunity cost?
Scenario 3

10. Think of one scenario similar to the
previous examples given by me.
Share them with the person sitting next to
you to test if they can identify the
opportunity cost.
Your Turn

11. Define the term “opportunity cost” and
give an example for a management
consultant
who leaves her job to set up an e-
commerce business (4 marks)
Exam Question

12. AS Business Studies
Government and Entrepreneurs

13. When you speak with successful
entrepreneurs, they will often claim that
their achievements are in spite of
government action rather than because of
government support!
Governments

14. You should appreciate that government
likes enterprise and entrepreneurial
activity.
Why???
Governments

15. •Create jobs and help keep unemployment
low
•Invest and innovate
•Generate substantial export earnings
•Pay substantial amounts of tax
•Encourage competition in markets
WHY????? Entrepreneurs:

17. Revision