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Economic Issues and Policy 5th Edition by Jacqueline Murray Brux
Edition 5ISBN: 9780538750875Economic Issues and Policy 5th Edition by Jacqueline Murray Brux
Edition 5ISBN: 9780538750875 Exercise 1
Suppose your friend is strong on defense and insists that we must bolster our national defense, whatever the cost. How can you use economic logic to make him or her aware of the opportunity costs associated with his or her objective
Explanation
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Opportunity cost: The best alternative forgone in order to produce or consume something else; what you give up to get something else.
If we spend a huge amount on defense then we have to lose the production other necessary goods and services. In this case opportunity cost for defense products will be production of other goods and services. We can explain it with the help of an example of two countries Saudi Arabia and Costa Rica. Saudi Arabia is spending near about 9% of its GDP on defense but Costa Rica spends nothing on the defense. But life expectancy in Saudi Arabia is 73 years whereas life expectancy in Costa Rica is 79 years. Why because Costa Rica freeze up resources that can be devoted to health care , education and other life saving measures.
If we spend a huge amount on defense then we have to lose the production other necessary goods and services. In this case opportunity cost for defense products will be production of other goods and services. We can explain it with the help of an example of two countries Saudi Arabia and Costa Rica. Saudi Arabia is spending near about 9% of its GDP on defense but Costa Rica spends nothing on the defense. But life expectancy in Saudi Arabia is 73 years whereas life expectancy in Costa Rica is 79 years. Why because Costa Rica freeze up resources that can be devoted to health care , education and other life saving measures.
Economic Issues and Policy 5th Edition by Jacqueline Murray Brux
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