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The basic economic problem is that of Scarcity.
The basic economic problem is that of Scarcity.
Scarcity forces people to make choices and for every choice made, an opportunity cost is incurred.
Scarcity forces people to make choices and for every choice made, an opportunity cost is incurred.
By the end of this lecture, you should be able to:
Explain the problem of scarcity due to limited resources (land, labour, capital and entrepreneurship) and unlimited wants.
Explain how the problem of scarcity leads to the inevitability of choices by economic agents (consumers, producers and governments).
Explain the concept of opportunity cost and the nature of trade-offs in the allocation of resources.
Read Pages 5-9 of your lecture notes as you view the video
Read Pages 5-9 of your lecture notes as you view the video
CPE Central Prob of Econs.mp4Summary
Summary
Scarcity arises due to limited resources and unlimited wants.
Economic resources are resources used in the production of goods and services. These include land, labour, capital, and entrepreneurship.
Due to scarcity, economic agents have to make choices. Economic agents are assumed to be rational, when making choices.
When a choice is made, opportunity cost is incurred. This is defined as the net benefit of the next best alternative forgone.
Answer the following questions to test your understanding.
Answer the following questions to test your understanding.
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