Free «Scarcity and Opportunity Cost» Essay Sample

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 iseffective to meet individual and societal needs adequately. Scarcity of resources is often confused with economic shortage. In this caseeconomic shortage refers to the disparity inthe amount of goods demanded with the amountthat 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 amountof goods supplied when compared to the amount demand for the same.

With scarcity of resources, economists are correct when they stated that people cannot have all. This is because human wants are limitlessbut the resources availableare limited. Therefore each decision madeby aperson, corporate and governments entails foregoing an alternative. Therefore, it isprudent to end that scarcity is the reasonpeople, 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 economistpeople cannot have all.

The opportunity cost computation of the case abovecalculated 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 4000one cubic foot boxes from a truck. The computation will simply entails evaluating the opportunity cost of foregoing either producinggood 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 yardismowedthen unloading 4000 thousand boxes from the truck is the foregone alternative .On the other hand, if good produceda total of 4000 boxesareunloadedfrom the truck within two hours. Good 1 one which was mowing the lawn is the foregone alternative.

 
   

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