What causes opportunity cost

Scarcity of resources

Explanation:

Opportunity cost is an economic term that refers to the forgone benefits that arise from the decision-making process. The value of opportunity cost is the missed benefit of the next best alternative.

Opportunity cost occurs due to the scarcity of resources. The needs of society are limitless, and producers have to make attempts to satisfy those needs with limited resources. Authorities have to allocate resources and distribute them to meet different needs in the community. As resources are scarce, decisions have to be made on what order to follow when allocating them. Priorities are determined, which causes particular options to be preferred, leading to opportunity cost.