EPF1A. SCARCITY &

OPPORTUNITY COSTS

Basic Economic Structures

EPF.1a scarcity & opportunity costs 2

What is scarcity?

Essential question:

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What is scarcity?

The condition of NOT being able to have all the goods and services one wants.

It exists because human wants for goods and services exceed the quantity of goods and services that can be produced from all available resources

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Why do choices result in opportunity costs?

Essential question:

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Why do choices result in opportunity costs? All choices have opportunity costs

The opportunity value of a choice is the value of the best alternative given up.

Choices involve trade offs - weighing the expected value of one opportunity against the expected value of its best alternative.

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How do consumers, businesses and gov’t decision makers face scarcity of resources?

Essential question:

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How do we face scarcity of resources? Resources are scarce; Therefore, consumers,

businesses, and gov’t decision makers are forced to make choices about how to use resources

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Consumers face scarcity

Ex. a consumer with 2 hours of free time cannot go ice skating for 2 hours and see a movie during the same 2 hours.

Whatever choice is made, the alternative given up is the opportunity cost.

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Businesses face scarcity

Ex. Suppose a grocer is deciding whether to add a café or a pharmacy. It only has space for one.

It makes a choice, the not selected choice is the opportunity cost.

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Governments face scarcity Ex. Money spent on roads cannot be

spent on education.