There is no such thing as a free lunch 12 Key Elements of Economics

The Condition of Scarcity Scarcity: a condition of being scarce, not common, not plentiful (Webster’s Dictionary) Most people think that scarcity has something to do with the abundance of something

The Condition of Scarcity Economists look at scarcity differently: Our resources are limited…but our desires for goods and services are NOT. Something is scarce if it has more than one valuable use. Consider your time. When resources are used to do one thing, they are unavailable to do others.

Abundant, Scarce A resource can be both abundant and scarce if it has more than one valuable use. Water Milk

Not Plentiful, Not Scarce Smallpox virus Toxic waste Fur coat to a PETA member These may be scarce items if they have multiple valuable uses – but not because there is a limited quanitity

Scarcity is: Limited resources vs. Unlimited wants Our resources are limited…but our desire for goods and services is virtually unlimited. Things having multiple uses A resource is scarce if it has alternative uses. The fundamental economic problem facing all societies.

To Choose Is To Sacrifice Scarcity forces us to make choices. Choosing an action means we sacrifice doing something else. The opportunity cost of a choice is the value of what is given up.

Free This is a good time to talk about another four-letter word: Notice that there are a lot of FREE things out there. Ask the students what else is FREE. Write the list of answers on the board. The students will say such things as: air, water, education, SEX, (straws, napkins, condiments), buy one get one FREE, friendship, love, etc. Click and give the definition—It doesn’t cost anyone, anything. If it is TRULY FREE, then there is no cost to ANYONE. Go over the list of answers. Is there a costs to an water? Education? Sex? Condiments? Buy one get one FREE? Love? Friendship? Of course, they all cost. If you can’t think of an accounting cost, you always have the cost of TIME. Everyone knows that TIME is MONEY. Friendship takes time, love takes even more time, and what about sex? This is where you bring up the term opportunity cost. There is an opportunity cost to EVERYTHING, so guess what? Nothing is FREE.

Free Tell me what is It doesn’t cost anyone, anything! Notice that there are a lot of FREE things out there. Ask the students what else is FREE. Write the list of answers on the board. The students will say such things as: air, water, education, SEX, (straws, napkins, condiments), buy one get one FREE, friendship, love, etc. Click and give the definition—It doesn’t cost anyone, anything. If it is TRULY FREE, then there is no cost to ANYONE. Go over the list of answers. Is there a costs to an water? Education? Sex? Condiments? Buy one get one FREE? Love? Friendship? Of course, they all cost. If you can’t think of an accounting cost, you always have the cost of TIME. Everyone knows that TIME is MONEY. Friendship takes time, love takes even more time, and what about sex? This is where you bring up the term opportunity cost. There is an opportunity cost to EVERYTHING, so guess what? Nothing is FREE.

TINSTAAFL = Opportunity Cost There is no such thing as a free lunch! Opportunity Cost – the cost of the next best alternative use of money, time, or resources when one choice is made rather than another Opportunity Cost is the Opportunity Lost To Choose is to Refuse

Opportunity Cost All choices involve costs Not all costs are shared equally Costs of decisions that spill over onto others complicate issues (Externalities)

But, but, but… What if someone buys your lunch? This is merely a shift in the cost of lunch. It is not an elimination. And is it really free to you? How else could you have spent your time if you had not gone to lunch?

Who wants some candy? I need some volunteers to be snack experts Discuss Road Not Taken, Econ 101, and Opportunities and Costs articles