One of the Ten Principles of Economics in Chapter 1 is that people face tradeoffs. The growth that arises from capital accumulation is not a free lunch. What is the opportunity cost of that capital accumulation?
A)People need to work longer hours, thus having less time for leisure.
B)People need to consume less goods and services now in order to enjoy more consumption in the future.
C)People need to recycle resources so that future generations can produce goods and services with the accumulated capital.
D)People need to devote less time in school and more at work.

Question

Quizplus · Accepted Answer

The opportunity cost of capital accumulation is the next best alternative that must be given up in order to achieve such accumulation. In this case, people must consume less goods and services now (giving up current consumption) in order to save or invest in capital goods that can help produce more goods and services in the future. This is known as the "consumption-saving tradeoff" and it reflects one of the basic tradeoffs that people face in economics. The other options do not accurately describe the opportunity cost of capital accumulation.