ECO-2013 Chapter Notes -Fallacy, Opportunity Cost
Document Summary
Scarcity = there is less of a good freely available from nature than people. Choice = the act of selecting among alternatives. Making choices means we constantly face trade-offs between meeting one desire and. Resources = inputs people use to produce goods and services. Our ability to produce goods and services is limited precisely because of limited would like another desire nature of our resources. Human resources-productive knowledge, skill, and strength of human. Physical resources-tools, machines, buildings than enhance our ability to produce goods (aka capital) Scarcity is objective (fact based), while poverty is subjective (opinion based) Scarcity necessitates rationing, which creates different behaviors in people. The use of scarce resources is costly, so decision makers must make trade-offs. There is no such thing as a free lunch . Opportunity cost = highest valued alternative that must be sacrificed as the result of choosing an option. Individuals choose purposefully-they try to get the most from limited resources.
