How are scarcity, choice and opportunity cost related?
Choices will be made after the opportunity cost of a decision is weighed up. In economics, scarcity is defined as the condition of human wants and behaviour as a relationship between ends and scarce means which have. Scarcity, choice, opportunity cost, inevitability of choices, the basic which studies human behavior as a relationship between ends and scarce. Explain how demand-management policies may lead to a conflict of Because of scarcity, consumers and producers have to choose what they want to Opportunity cost measures the cost of making a choice, by the next best alternative foregone. Now offering economics tuition, pm for more details.
Opportunity Cost If we decide and choose which want to satisfy with the available resource, then there are other wants we have to leave unsatisfied. We have to forgo something in order to satisfy a want. The concept of scarcity, choice and opportunity cost can be shown in many ways, at different levels.
For an individual, it may involve choosing the best from the choices available. For example, a student may have to choose between doing A levels and going for a diploma right after finishing O levels. Choosing one option means the other option has to be forgone. A firm may have to choose between different production methods.
A government may have to choose between different development projects. Inevitability of choices Each and every level of economic agent individuals, firms or government has to make the choices as all of them are confronted with central economic problem scarcity. Governments have to decide on the best possible way to allocate resources example — where and what kind of factories must be builtthe firms have to decide how to maximize profit what is the most efficient way to produce goods and individuals have to decide how to maximize their welfare which goods will give them most satisfaction.
In the process of making this choice they have to give up other alternative so the concept of opportunity cost is applicable for each and every level of economic agents. The basic economic questions There are some basic questions faced by every society.
How they are answered depends largely on the type of economic system the country has. What to produce primarily depends on consumers in free market. The consumers choose the product they like and thus their choices direct the types of production that should be carried out. The firms will follow this because this is the most profit maximizing combination.
Economics: The Study of Choice
Sometimes the government too can decide what to produce. The government may decide to produce an essential good or service which everyone ought to have. This question will be answered by those supplying the goods and services.
If the supplier is a private firm, it will seek to use the method which will give the maximum profit. In upper elementary school, students can use the PACED decision-making model to decide between more than two alternatives. In the PACED model, students learn to identify the problem P or decision they have to make, list the alternatives A available to them, identify a set of criteria C they can use to evaluate the different alternatives, evaluate E the alternatives based on the criteria, and make a decision D between the alternatives.
The students are then asked to identify the opportunity cost — the next best alternative — of the choice they made. By middle and high school, students should be able to identify more complex opportunity cost problems and make use of a production possibilities curve to show how production in a two-good economy is allocated.
Discussions of opportunity cost in the high school classroom can be used to address pressing current events. For example, you might ask your students to assess this situation: They can discuss how to identify the opportunity cost associated with buying the cheaper gas. The connections with personal finance issues are some of the most important contexts in which students can use opportunity cost.Scarcity, Choice and Opportunity Cost
Teaching middle and high school students to budget and make realistic spending decisions are important. Doing so also lends itself well to discussions of opportunity cost and choice. Most household budgets require individuals and the household to make tradeoffs between different things on which to spend household income.
Scarcity, choice, and opportunity costs
With sound decision-making skills that are well grounded in the concept of opportunity cost, our young people can be expected to make more thoughtful budget decisions as they go off to college and the world of work.
Here are some additional resources related to opportunity cost, scarcity, and choice: The lesson can be downloaded at www. The lesson can be found online at www. The answers are then summed for each alternative and a decision is made. In later grades, a numbered scale e. After summing the results, the students indicate the choice they would make and then identify the opportunity cost of their decision.
- Scarcity, choice and opportunity cost
- Explain the relationship between the following terms scarcity, choice, opportunity cost?
- Explain how scarcity, choice and costs are related to the problems of consumers and producers.
P — Identify the problem or decision that needs to be made.