ScarcityScarcityChoiceChoiceOpportunity CostOpportunity Cost

Unlimited WantsUnlimited Wants Limited ResourcesLimited Resources

ScarcityScarcity ChoiceChoice

Opportunity CostOpportunity Cost

Scarcity is Scarcity is -a universal problem.-a universal problem. It happens everywhere, It happens everywhere, whether in a rich or poor country.whether in a rich or poor country.-a relative concept.-a relative concept. Whenever we want more that we have,Whenever we want more that we have, Scarcity exists. Scarcity exists.

Example of scarce goods:Money, happy, health, friendship,etc.

Goods are scarce ifGoods are scarce if1) we want to have more of it,1) we want to have more of it,2) its availability cannot satisfy2) its availability cannot satisfy every want for it.every want for it.

ScarcityScarcity

Opportunity CostOpportunity CostOpportunity Cost of a choice is the highest valued option forgone.

1. Cost arises from making choices.1. Cost arises from making choices.

2. Cost changes only if the 2. Cost changes only if the highest-valued option forgone highest-valued option forgone changes.changes.

3. A change in cost is not equal to a 3. A change in cost is not equal to a change in value.change in value.

Opportunity Cost:Go for picnic.

Brother(go on picnic)

I think the table of yesterday is very

bad.

Nochange

Although the value of playing table tennis decrease,it is not the opportunity cost, then the opportunity cost is no change.

But the food was very tasty, we still enjoy it very much, we were

happy yesterday.

The value of go on picnicincrease, then the opportunity cost increase.

Yesterday, there were many rubbish in the countryside.

The value of go on picnicdecrease, then the opportunity cost decrease.

Yesterday, I could go on a picnic with family and I could play

table tennis with my friend. At last, I played table tennis with friend. Then the opportunity cost is go on the picnic with

family.

Friend(play table tennis)

Case 1

She have $100.

Unavailable options:

Available options:

Dress $122 Jeans $150 Skirt $50 T-shirt $80Coat $100

My first priority is skirt,

Dress, Jeans

Coat, Skirt, T-shirt

the second priority is coat,

the third priority is T-shirt.

32 1

When I choose coatcoat,My opportunity cost is skirtskirt.

When I choose skirtskirt,My opportunity cost is coatcoat.

When I choose T-shirtT-shirt,My opportunity cost is skirtskirt.Case 2

Scarcity arises is because we do not want more of it. For example, sea water. Scarcity is a relative concept. It depends on the quantity available relative to wants. Do you know?

Scarcity arises because the supply of resources or goods is

fixed in supply, am I right?

NO! NO! NO!NO! NO! NO!YOU ARE WRONG!YOU ARE WRONG!

Yes! Case 3

Miss Cheng could spend two hours at a concert orMiss Cheng could spend two hours at a concert ortutoring a student at $70 per hour. She could use the time tutoring a student at $70 per hour. She could use the time on painting instead and earn a total of $170. If the price of on painting instead and earn a total of $170. If the price of the concert ticket is $250, what is the opportunity cost of the concert ticket is $250, what is the opportunity cost of her choice of going to the concert?her choice of going to the concert?

A. $410A. $410 B. $420B. $420 C. $430C. $430 D $440D $440

No. of couponsNo. of coupons GiftsGifts

55

1515

2020

CupCup

BagBag

CameraCamera

Mary has accumulated 20 Coupons.Mary has accumulated 20 Coupons.What is the opportunity cost to her What is the opportunity cost to her if she uses them to exchange for one if she uses them to exchange for one camera?camera?

A.Cup A.Cup B. BagB. Bag C. Cup and BagC. Cup and Bag D. Cup or BagD. Cup or Bag

Which of the following statementsabout scarcity is true?

A. Once a choice is made, the problem of scarcity is solved.

B. A good is scarce if not everyone has it.

C. Scarcity means unlimited human wants.

D. Both rich people and poor people face the problem

of scarcity.

Answer: D

Which of the following are opportunity costs of attending school?

(1) Poor examination results

(2) Income forgone

(3) School fees

(4) Expenditure on dinners

A. (1) and (4) only

B. (1) and (3) only

C. (2) and (3) only

D. (2) and (4) onlyAnswer: C. (2) and (3) only