In Economics the concept of scarcity is paramount. This is because it gives rise to opportunity cost. Individuals have to make choices on the products they wanted in their lives every day. These choices are prevalent with the underlying reason of scarcity. Therefore, it paramount that the study defines the terms scarcity and opportunity cost to bring out the link between them. Scarcity in economics is the prevailing personal or societal condition in which the wants of each is greater than the resources available to meet those wants satisfactory. Resources in this case refer to the inputs of production that are essential in economies.
On the other hand opportunity cost refers to the services or goods that an individual forgoes. Scarcity prevails at all levels of the society. This is because of limited resources available. Therefore, people have to choose between different alternatives. This leads to opportunity cost. Therefore opportunity cost is a direct implication of scarcity in resources. It entails trade-offs in choices that made by people and corporate. These trade-offs make sure that the resources allocations in both areas is effective to meet individual and societal needs adequately. Scarcity of resources is often confused with economic shortage. In this case economic shortage refers to the disparity in the amount of goods demanded with the amount that is supply in the market. It is clear that disparity results in overall deficit in the products demanded. Scarcity in economics primarily deals with resources while shortage entails seller’s price in which they are not willing to supply products to the market at the prevailing markets prices. This lead to a shortage in the amount of goods supplied when compared to the amount demand for the same.
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With scarcity of resources, economists are correct when they stated that people cannot have all. This is because human wants are limitless but the resources available are limited. Therefore each decision made by a person, corporate and governments entails foregoing an alternative. Therefore, it is prudent to end that scarcity is the reason people, corporate and government make decisions. The decision to use particular resources on a given activity means those resources cannot be used to do something else. This results in opportunity cost. Consequently according to economist people cannot have all.
The opportunity cost computation of the case above calculated with regard to good 1 and good 2. In this case good 1 was mowing the grandmother’s yard of one acre within two hours. On the other hand good 2 entailed unloading 4000 one cubic foot boxes from a truck. The computation will simply entails evaluating the opportunity cost of foregoing either producing good 1 or good 2. Each of the alternative chosen has to make sure that it is worth the time value allocated to producing it. Therefore, opportunity cost in this scenario computed as good 1 production instead of good 2 in which one acre yard is mowed then unloading 4000 thousand boxes from the truck is the foregone alternative .On the other hand, if good produced a total of 4000 boxes are unloaded from the truck within two hours. Good 1 one which was mowing the lawn is the foregone alternative.
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