Some Basic Economic Concepts for Personal Wealth Management

Economics

The social science concerned with distributing scarce resources among alternative ends.

Economist

The word economists is taken from the Greek word oikonomia, which means "house management".

It originally applied to persons who were good administrators within a community, business or home.

The Economic Problem

The problem of having unlimited wants but limited resources with which to satisfy them.

Scarcity leads to Choice

choices and trade-offs are necessary

this is the core of many personal wealth decisions

The Concept of Opportunity Cost

The value of the next best alternative foregone

The Concept of Opportunity Cost

For example, what is your opportunity cost of attending this class today?

What is the opportunity cost of taking $500 from your savings account to go to Vancouver for the weekend?

The concept of opportunity cost is useful in making decisions.

It illustrates that there is “no free lunch”

Trade-offs are required.