The Economic Problem

what is the central economic problem?

Scarcity, there are not enough resources on earth to satisfy humans unlimited wants and needs.

Opportunity cost

The cost of one item can be seen as the lost opportunity to consume something else, the next best option.

Issues of opportunity cost

• not all factors have alternatives

• some alternatives are unknown

Opportunity cost uses

can be useful when thinking about allocating resources, consumers can use it to decide how to spend their earnings.

static efficiency

the efficiency at a point in time, and can be separated into allocative and productive.

Movement along the PPF

reflect the reallocation of resources

PPF shift

represents the resource changes, increase and decrease