GETTING DOWN TO Business: Scarcity and opportunity costs

Questions: Does Bill Gates have to deal with scarcity? What about the United States Government? Is it possible to eliminate people’s wants?

The Two Paths of Scarcity… Because we know scarcity exists, there arises two distinct consequences: 1.) The need for a rationing device 2.) Competition

What is a rationing device? A rationing device is a way to decide who gets what amount of available goods or resources (add to your definitions list). Obvious Example: MONEY!!! However, if money didn’t exist, do you think people would develop an alternative rationing device?

Competition We live in a competitive world: Grades, sports, attention, more friends, nicest car…etc. What is one thing you are competitive about? Draw a flow chart showing the two paths of scarcity.

Opportunity Costs Add this to your list of definitions: Opportunity Costs: the most valuable thing you give up when you make a choice (the next best thing). It can only be 1 thing!!! Trade-offs are basically the same as opportunity costs (when I choose one thing over the other, I am giving something up)

Opportunity Costs Continued Opportunity Costs change the way people behave. Example: Ice Cream and cookies Everyone knows that I love cookies. If my only dessert option was ice cream, most likely I would choose that, or lose out on dessert all together. However, given the choice, I would choose cookies over ice cream every time. The opportunity cost of choosing ice cream is loosing out on cookies.