Question

Analise the link between scarcity, choice & opportunity cost. Give relevant examples to support your answer.

Answer 1

The key assumption to this question is that desire is unlimited. People want everything. However, scarcity means that there are limited "things" in this world, whether that be resources, goods, services... etc. Because there are limited things, people must choose between these "things." The very nature of choice, however, results in opportunity cost because by choosing, one must give something else up. The most basic example is time. People want to do everything- they want to make money, they want to travel, they want to hang out with friends... etc. But time is limited. Therefore, people must choose what to do with their time. Let's say that someone has to study but also wants to spend time with friends but only has 15 hours a day to do both these things. Clearly people cannot spend all day studying AND spending time with friends so they must choose. By studying, the person is giving up time with friends. By spending time with friends, he or she is giving up time to study. The activity being given up is the opportunity cost.

Answer 2

well done.. its almost the one that i was waiting for..