How can a good available @ zero price have an opportunity cost?also explain the features of scarce goods in detail.
Shri Lakshmi,
Opportunity cost is described as the amount of a good (say, capital good) sacrificed in order to produce another good (say, consumer goods). A good available at zero price involves opportunity cost because it can be used for some other purpose as well. Suppose, free clothes were given to poor children in NGO is available at zero price, yet it involves opportunity cost because these clothes could be used for some other purpose as well.
The features of scarce goods are as follows.
i) It has some positive value in terms of price.
ii) It should have some opportunity cost.
Opportunity cost is described as the amount of a good (say, capital good) sacrificed in order to produce another good (say, consumer goods). A good available at zero price involves opportunity cost because it can be used for some other purpose as well. Suppose, free clothes were given to poor children in NGO is available at zero price, yet it involves opportunity cost because these clothes could be used for some other purpose as well.
The features of scarce goods are as follows.
i) It has some positive value in terms of price.
ii) It should have some opportunity cost.