ECONOMICS
How society manages its scarce resources since resources are limited
CHOICE
A sacrifice of alternatives
Alternatives have to be real and not “no brainers“
Regret has to be possible
WAYS TO SOLVE THE SCARCITY PROBLEM
Only way to solve scarcity problem is by using factors of production
TRADE-OFF GRAPH
Graph that shows choices
CAN WE ESCAPE CHOICE ?
Not in a world of scarcity
SCARCITY PROBLEM AS THE CENTRAL PROBLEM
Means (resources) are not enough to meet all ends (needs)
BETTER CHOICES MEANS?
Satisfying more needs with limited resources
Satisfying the same needs with fewer resources
WHAT IS A GOOD CHOICE ?
You don't look at what you gain,you consider what you sacrifice to get it .
Good choices = smaller opportunity cost
OPPORTUNITY COST
A sacrifice of the next best alternative
The one that you don't choose is your opportunity cost
TRADE-OFF CURVE/LINE
IF TWO POINTS ARE CONNECTED THEN IT MEANS THEY ARE EQUIVALENT
AND THEREFORE REAL ALTERNATIVES
If they are not connected /not on same curve ….then they are not real alternative
Superior point:
Above the curve and it means factors of production are being maximised
Inferior point :
Below the curve and means that factors of production are not being fully utilized
MARGINAL THINKING
Don't think about the total gain
Think about the extra (marginal) gain
Is it worth the extra(marginal) loss?
Think about the change
Don't consider total losses from the past
Think about the changes in the future
Last changed9 months ago