Suppose an agricultural labourer earns Rs. 400 per day in her village. She gets a job to work as babysitter in a nearby town @ Rs. 700 per day. She chose to work as agricultural labourer. Which one of the following is the opportunity cost of the agricultural labourer?
Rs. 300
Understanding Opportunity Cost for an Agricultural Labourer
This question asks us to determine the opportunity cost for an agricultural labourer who makes a choice between two potential jobs. Understanding opportunity cost is key to analyzing economic decisions.
What is Opportunity Cost?
Opportunity cost is a fundamental concept in economics. It represents the value of the next best alternative that must be forgone in order to pursue a certain action. When you make a choice, you give up the chance to do something else. The benefit you would have received from that "something else" is your opportunity cost.
Analyzing the Labourer's Choices
The agricultural labourer in the question has two options for earning money:
- Option 1: Work as an agricultural labourer in her village and earn Rs. 400 per day.
- Option 2: Work as a babysitter in a nearby town and earn Rs. 700 per day.
She chose to work as an agricultural labourer, accepting the Rs. 400 daily wage.
Calculating Opportunity Cost
Based on the standard definition, the opportunity cost of choosing to work as an agricultural labourer (earning Rs. 400) is the value of the next best alternative she gave up. The next best alternative was working as a babysitter (earning Rs. 700).
So, according to the standard definition, the opportunity cost would be Rs. 700.
However, the provided options and answer suggest a different calculation or interpretation might be intended, specifically arriving at Rs. 300. The value Rs. 300 is the difference between the earnings of the two jobs:
\( \text{Earnings from babysitting} - \text{Earnings from agricultural work} = \text{Difference} \)
\( Rs. 700 - Rs. 400 = Rs. 300 \)
This difference represents the additional income she could have earned by choosing the babysitter job. It can be interpreted as the *net* benefit forgone or the economic cost relative to the chosen path.
Given the options, Rs. 300 represents the difference in potential earnings between the two jobs, which is presented as the opportunity cost in this specific question context.
Revision Table: Opportunity Cost Concepts
| Concept | Explanation |
|---|---|
| Opportunity Cost | The value of the next best alternative that is given up when a choice is made. |
| Scarcity | The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources. Choices must be made due to scarcity. |
| Economic Decision | A choice made involving the allocation of scarce resources. |
Additional Information: Factors Influencing Labourer's Choice
While the question focuses purely on monetary opportunity cost, in reality, the labourer's decision might be influenced by other factors besides just the daily wage. These could include:
- Working conditions (agricultural work vs. babysitting)
- Distance to the job (village vs. nearby town) and travel costs
- Job security or regularity of work
- Personal preference for the type of work
- Time commitment (hours per day)
- Social factors (working in the village among familiar people)
These non-monetary factors can also play a significant role in a person's decision-making process when comparing alternatives, even if not considered in the calculation of monetary opportunity cost as shown in the question.
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