Constant Opportunity Cost

Definition

Constant opportunity cost refers to the concept that as more units of a particular good are produced, the opportunity cost remains constant. This means that resources are equally suited for producing both goods.

Analogy

Think about baking cookies with your friend. If you both contribute an equal amount of ingredients and effort, then no matter how many cookies you bake together, the opportunity cost remains constant because each cookie requires an equal share from both parties.

Related terms

Law of Diminishing Returns: This law states that as additional units of a variable input are added while other inputs remain fixed, eventually there will be a decrease in marginal output.

Trade-off: A trade-off occurs when choosing one option over another involves sacrificing some benefits or advantages.

Comparative Advantage: Comparative advantage refers to the ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than others.