Apply opportunity cost to decisions by consumers, workers, firms and governments in CAIE IGCSE Economics, explaining the next-best use of limited resources.
A Swiss multinational food manufacturer increased prices for its products by an average of 8% in 2022. It increased its prices in the USA by 11.6%. This multinational company (MNC) is one of the world's oldest MNCs. It started as a small firm but has grown over the last 160 years. Over this period, its decisions have always been influenced by opportunity cost.
Analyse how opportunity cost influences the decisions made by consumers, workers and producers.
Coherent analysis which might include:
- opportunity cost is the (next) best alternative ( 1 ) forgone / given up (1)
- example of consumers e.g. must decide between buying different products (1) due to limited income (1)
- example of workers e.g. must decide between different jobs or between work and leisure (1) as time is limited (1)
- example of producers / firms e.g. must decide what to make / how to make it / where to locate (1) as they have limited (financial) resources (1).
Maximum of 4 marks if candidates do not cover at least two out of consumers / workers / producers.