Scarcity + Opportunity Cost + PPF

Chapter 1 - Scarcity, Opportunity Cost and PPF

Relative scarcity

the basic economic problem of having unlimited wants and needs, however limited resources

What is economics the study of?

Economics is the study of choice. A choice of how our economy chooses to allocate our scare resources to meet the unlimited wants and needs of society while maximising living standards

What are the 3 questions that address the issue of scarcity?

1. What to produce

2. How to produce

3. For whom to produce

Opportunity cost

The value of the next best alternative being foregone when a decision is made

Trade off

A trade off is the value of all alternatives that are given up when making a choice

How can opportunity cost be graphed

The production possibility frontier