200425 Lecture Notes - Lecture 1: Opportunity Cost

• School: UWS
• Department: University of Western Sydney
• Course: 200425
• Professor: anonymous

Document Summary

All societies face the economic problem, which is the problem of how to make the best use of limited, or scarce, resources. The economic problem exists because, although the needs and wants of people are endless, the resources available to satisfy needs and wants are limited. Choice and opportunity cost are two fundamental concepts in economics. Given that resources are limited, producers and consumers have to make choices between competing alternatives. Individuals must choose how best to use their skill and effort, firms must choose how best to use their workers and machinery, and governments must choose how best to use taxpayer"s money. Making an economic choice creates a sacrifice because alternatives must be given up, which results in the loss of benefit that the alternative would have provided. Similarly, land and other resources, which have been used to build a new school could have been used to build a new factory.