ECO105Y1 Lecture Notes - Opportunity Cost
Document Summary
And in other times, it is more elastic. Businesses must pay higher prices to obtain more of an input because opportunity costs change with circumstances. Marginal cost is the additional opportunity cost of increasing quantity supplied and this changes with circumstances. Marginal cost increases as you increase quantity supplied. To buy inputs, business must pay price matching best opportunity cost of input owner. Sunk costs are past expenses that cannot be recovered. Same no matter which fork in the road you take. Quantity supplied is the quantity you actually plan to supply at given price. Supply is the businesses willingness to produce a particular product service because price covers all opportunity costs. Profit and covering opportunity costs are the reasons for increasing supply. There is unevenness in opportunity costs because not all inputs are productive at the same rate. Everybody is good at piercing but not with fingernails. There is different level of productivity for inputs.
