The occurrence of natural disasters such as earthquakes, hurricane, and floods cause mass destruction, therefore, affecting the economy of the State. Following the Wreak havoc caused by these natural disasters, a decision and a choice have to be made. In this case, the State makes a choice of using its fund in dealing with natural disasters and preventive measures. The available resources are scarce and therefore the wise decision is required. In so doing, natural disasters are examples of opportunity cost. Taking an example of Hurricane Sandy which was one of the deadliest and destructive hurricanes in the year 2012, it was approximated to cause a damage worth $ 60 billion dollars which is in the rage of a day’s GDP. The damage cost was too high and the half of this amount was used in the recovery while the other half of was used in the lost production (Barr, Cohen & Kim, 2017). This act as an example of opportunity cost where a choice was made since this fund could have been used in the further investment in the economy and how it was spent in damage recovery.
This fund would also have been used as input in other economic activities such as farming where the society of the affected area would have used in upgrading their farming machines. Taking another example of the preparation of Napa quake where Shake Alert system would cost California approximately $80 million for the pre-alerts system that was used in Japan and assisted them in reducing the damage from $1.5 million to $200,000 (Alexander, 2017). The issue of opportunity cost arises on making a decision on whether to use that amount in the Alert system or in preparation for the Natural disaster that would just come in a day or decades. In this case, cash which is a resource is limited and the economy is facing scarcity of resources.
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References
Alexander, D. C. (2017). Natural disasters. Routledge.
Barr, J., Cohen, J. P., & Kim, E. (2017). Storm Surges, Informational Shocks, and the Price of Urban Real Estate: An Application to the Case of Hurricane Sandy (No. 2017- 002). Department of Economics, Rutgers University, Newark.
