Question

Raghavi was an IT professional and earned ₹ 30 lakhs per annum. She left her job and started organic farming in her village. She began to earn ₹ 20 lakhs per annum.

What would be the opportunity cost for Raghavi for shifting to organic farming? Justify your answer. 

Answer 1

Opportunity cost = the value of the next-best alternative Raghavi gave up. Here her next-best alternative was staying in the IT job earning ₹ 30 lakhs per year. So the opportunity cost of shifting to organic farming is ₹ 30 lakhs per annum (the forgone salary).