2.2: Scarcity of resources and opportunity cost

do businesses have unlimited resources

no, they only have limited resources like a set number of machines, limited amount of material and financial resources to produce goods and services

do households have unlimited resources

no, they only have a certain income they can spend on goods and services, which limits their purchasing power

are resources always scarce

yes

what does scarcity of resources lead to for businesses and individuals

it forces them to make decisions on how to use limited resources such as what and how to produce, what to buy and how much to spend

the basic economic problem stemming from limited resources

deciding how to use limited resources and making choices when allocating resources between different options

opportunity cost

financial benefit of the next best alternative which is given up in order to choose something else