The inevitability of choice at all levels causes the need to make decisions about the possible alternative uses of scare resources, arise. This is due to the existence of limited resources and unlimited wants and needs.

These choices are graded in terms of the benefits to be gained from each alternative with the alternatives appearing in a scale of preference with basic needs at the top.

Rational economic agents choose the “best option” however, the next best alternative becomes the opportunity cost.

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