Scarcity, choice and opportunity cost
Introduced| English | Meaning |
|---|---|
| wants/wɒnts/ | Goods, services or experiences people would like to have beyond their essential needs. |
| scarcity/ˈskeəsɪti/ | The condition in which limited resources cannot satisfy all competing wants. |
| resources/rɪˈzɔːsɪz/ | Inputs or assets available for use in achieving a purpose. |
| finite/ˈfaɪnaɪt/ | Having a limited size, number or extent. |
| opportunity cost/ɒpəˈtjuːnɪti kɒst/ | The value of the best alternative forgone when a choice is made. |
| next best alternative/nekst best ɔːlˈtɜːnətɪv/ | The most valuable option forgone when a choice is made. |
| consumers/kənˈsuːməz/ | People or organisations that buy or use goods and services. |
| production possibility frontier/prəˈdʌkʃn ˌpɒsəˈbɪlɪti ˈfrʌntɪə/ | production possibility frontier |
Why you can never have everything
- There will never be enough — enough time, money, land, or workers — to satisfy everyone's wants 欲望.
- That single fact, scarcity 稀缺性, is where all of economics begins. It forces every person, firm and government to choose.
The economic problem
- Resources 资源 (land, labour, capital) are finite 有限的; human wants are unlimited.
- So every society must answer three questions:
- What to produce?
- How to produce it?
- For whom to produce it?
A car assembly line: capital (machines and robots) plus the division of labour, each worker or robot repeating one task
The basic economic problem arises because:
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Scarcity = unlimited wants meeting finite resources; it forces choice.
Every economy must decide what to produce, how to produce it, and for whom.
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These three questions follow directly from scarcity.
Match each economic agent to a choice it faces.
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Scarcity forces choice at every level — consumers, firms and governments alike.
Choice and opportunity cost 机会成本
- Because resources are scarce, choosing one thing means giving up another.
- Opportunity cost = the value of the next best alternative 次优选择 you give up.
- It applies to consumers 消费者 (a phone vs a holiday), firms (cars vs trucks) and governments (hospitals vs schools).
A straight PPC means constant opportunity cost; a bowed PPC means increasing opportunity cost
Opportunity cost is:
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It is the single next-best alternative sacrificed, not the money price or every option.
Showing it on a PPF
- A production possibility frontier 生产可能性边界 shows the maximum combinations of two goods an economy can make.
On the curve (A) is efficient; inside (B) wastes resources; beyond (C) is unattainable. Moving along the curve has an opportunity cost.
Reading opportunity cost. To make more consumer goods (move right along the curve), the economy must give up some capital goods (move down). That sacrifice is the opportunity cost.
The production possibility frontier
Producing more of one good means giving up some of the other — that trade-off is the opportunity cost, shown by the slope of the frontier.
A point inside (below) the production possibility frontier represents:
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Inside the curve means resources are unemployed or wasted — production could rise.
Moving along a PPF to make more of one good has an opportunity ______.
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You sacrifice some of the other good — that sacrifice is the opportunity cost.
A common confusion
Opportunity cost is the next best option, not all the options you didn't choose. If you skip a film to study, and your alternatives were a film, a nap and a walk, the opportunity cost is just the single most-valued one — not all three.
You've got it
- scarcity: finite resources vs unlimited wants → the economic problem (what/how/for whom)
- opportunity cost = the value of the next best alternative given up
- the PPF shows efficient (on), wasteful (inside) and unattainable (beyond) combinations