GCE Economics 2013 Theory — Question 3

Model answer

(i) Money Cost is the amount of money incurred or spent in the purchase of a commodity; this is what an accountant knows as cost. Opportunity Cost is the sacrificed or foregone alternative - the value of the next best alternative given up; it is what an economist knows as cost. (ii) A Normal good is a type of good whose demand rises as the income of the consumer increases, and vice versa. An Inferior good is a type of good whose demand rises as the income of the consumer falls, and vice versa (higher income leads to lower quantity demanded).