Each example illustrates that people can't have everything they want. Emily doesn't have enough money to buy all she wants. The basketball team doesn't have enough draft choices to get all the good

Chapter 1

Each example illustrates that people can't have everything they want. Emily doesn't have enough money to buy all she wants. The basketball team doesn't have enough draft choices to get all the good players it wants. Finally, the city government is unlike­ly to get enough money for all the facilities it wants.

Scarcity is the result of an inability to satisfy all of everyone's wants. You face scarcity when you have more things to do dur­ing the day than time to accomplish them. So your time is scarce. You also face scarcity when you go shopping. Like Emily, you may see five or 10 items you want, but you know you can't afford to buy them all.

Everyone faces scarcity. Consumers want more than they can afford. People don't have enough time to get everything done. Even businesses face scarcity. The people who own and manage

businesses can't hire all the workers they would like to have or buy all the equipment and supplies they want. Likewise, governments face a scarcity of funds, despite their power to raise money through taxation. Consequently, we all must make choices about using money, time, and other resources.

How does this photo of oil der­ricks illustrate the problem of scarcity?

"The solution to scarcity is obvious," you might say. "If the government printed more money, we could afford all we want." But the problem isn't really a scarcity of money; it's a scarcity of all the things we buy with money-goods and services. Goods and services are scarce because our resources are scarce.

Scarcity is the result of an inability to satisfy all of everyone's wants

►W Opportunity Cost

Not only are resources scarce, but they can only be used one way at a time. Consequently, when you choose to use a resource for one purpose (e.g., human labor or skilled work), you give up a chance to use it for another.

Suppose you want a new CD player that costs $100. But you also want a pair of basketball shoes that costs $100. To make matters worse, your TV stopped working and the technician wants $100 to fix it. You can afford a CD player, a new pair of basketball shoes, or the TV repair service, but not all three. You need to make a choice!

After thinking about your three opportunities, you decide to buy the CD player. What do you give up by making that choice? You could have picked either the basketball shoes or the TV repair, but you could not have bought both with your $100. Economists explain that your cost is whichever of these two other opportunities is more valuable to you.

If you value the basketball shoes more than having your TV repaired, then the basketball shoes are your opportunity cost of buying the CD player. Opportunity cost is the best alternative you give up when making a choice.

Economists think of costs as opportunities given up. So cost and opportunity cost generally mean the same thing. Still, economists often include the word opportunity to remind us of the real opportunities we sacrifice when we make choices. Businesses have opportunity costs too. When a business purchases CD players and other electronic goods, hires and trains a sales

Дата добавления: 2015-08-28