Chapter 5.2, Problem 3R

To determine

To ascertain the opportunity cost when there is comparison shopping in case of clothes.

Answer to Problem 3R

The opportunity cost for comparison shopping for clothes is the time spent on making the comparison considering the various factors which should be taken care of. And as the search activity for comparison decreases, the opportunity cost also decreases.

Explanation of Solution

The comparison shopping is done getting information about the product which is to buy from the various sources such as newspaper advertisements, browsing the web, visiting different stores of clothes, etc. It helps the buyer in knowing whether the money he is going to spend is worth it or not. How far can he/she negotiate the prices, or is there any substitute available for the same product in less price with equal or better quality, etc.

Doing all this, the buyer spends a lot of time, which is the time spent as the opportunity cost in which he/she does nothing but get the information about the product and is not using that time for any other work.

Economics Concept Introduction

Introduction:

Opportunity cost: This term can be easily explained as “The next best alternative” which explains that when a consumer has options to buy from two commodities available, he/she will go for the commodity which provides more satisfaction or has more value to the person, sacrificing the other commodity. That sacrifice he/she makes is the opportunity cost.

Comparison shopping; This term can be easily understood as it tells about the shopping done comparing different factors related to a product as its price, quality, features, safety, etc. A product is purchased making comparative analysis so that it can ensure the best service expected from it.