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The Core of Economics: Scarcity and Choice
People make choices because they can't have everything they want. Whenever a choice is made, something is given up. The opportunity cost of that choice is the value of the best alternative given up. People whose wants are satisfied by using goods and services are called consumers.
Scarcity is the condition of not being able to have all the goods and services that one wants. (Be aware that this link will take you outside of this site). It exists because human wants for goods and services exceed the quantity of goods and services that can be produced using all available resources.
Scarcity is the most fundamental problem in economics. Economists are fond of saying that "there is no free lunch," which means that, even if something is "free" to us, there is a cost to society in terms of the alternative foregone.
The reality is that cannot have everything that we want. So, faced with scarcity, individuals, government and society in general must make choices. We make choices every day. Is watching TV the best use of our time? Is working at a fast-food restaurant better than the best alternative job or some other use of your time?
Whenever a choice is made, something is given up. The opportunity cost of a choice is the best alternative given up. Choices involve trading off the expected value of one opportunity against the expected value of its best alternative.
To make efficient decisions - decisions that provide the greatest possible return from the resources available , people and society must weigh the benefits and costs of using their resources to do more of some things, and less of others. For example, to use their time effectively, students must weigh the additional benefits and costs of studying economics rather than listening to music or socializing with friends, or sleeping.
In other words, the economic choices that you make will not always be measured by the amount of money that you spend. Time is also a scarce resource and it should be allocated efficiently.
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