Scarcity, choice and opportunity cost

What you'll learn

• Explain the fundamental economic problem of scarcity.
• Explain the need for individuals, firms, and governments to make choices.
• Define the meaning of opportunity cost.
• Explain how opportunity cost results from the need to make choices.
• Explain the basic questions of resource allocation.
• Understand why the fundamental economic problem of scarcity occurs.
• Understand why individuals, firms and governments have to make choices because resources are scarce.
• Understand that opportunity cost results from the need to make choices and is the next best alternative that is foregone.
• Analyse why the fundamental economic problem requires all economies to answer three important questions: what to produce, how to produce, for whom to produce.

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