point outside the constraint is not affordable, because it would cost more money than Alphonso has in his

budget.

The budget constraint clearly shows the tradeoff Alphonso faces in choosing between burgers and bus tickets.

Suppose he is currently at point D, where he can afford 12 bus tickets and two burgers. What would it cost

Alphonso for one more burger? It would be natural to answer $2, but that’s not the way economists think.

Instead they ask, how many bus tickets would Alphonso have to give up to get one more burger, while staying

within his budget? Since bus tickets cost 50 cents, Alphonso would have to give up four to afford one more

burger. That is the true cost to Alphonso.

The Concept of Opportunity Cost

Economists use the term opportunity cost to indicate what people must give up to obtain what they desire.

The idea behind opportunity cost is that the cost of one item is the lost opportunity to do or consume
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