 Meaning: Resources are insufficient to satisfy ALL human wants  A relative concept: we want more than we have  Basic economic problem in human societies

 We have Unlimited Wants and Needs  But Limited Resources Create Scarcity  So we need to make Choices  What to produce,  How to Produce,  For Whom to produce

1. Personal Perspective: your own feelings of what is needed or wanted. 2. Poor Distribution of Resources: not using your resources to their potential. 3. Rapid Increase in Demand: A sudden rush to use resources can cause a shortage.

1. Doing without something 2. Creating more resources 3. Making better use of our resources

 We compete for the use of limited resources  Two types of competition  Price competition  Non price competition e.g. waiting, examination, lucky draw, violence…

 Which restaurant will you go for lunch?  What would you like to study at university?  What will you buy with $100? CD or dress ?  Which girl (boy) will you marry?

 Def. All of the resources used to produce a good or service.  Most resources can be used for only one thing at a time.

 Real costs of building a bridge instead of a building  Construction workers (cannot work on building a new building)  A crane (cannot be used to build a new building)  Steel (used in the bridge, cannot be used in a new building)

Def. When you choose between two possible uses for a resource, giving up one alternative for another. Ex. Bridge vs. Building I can either buy this book or pizza, but not both.

 When you make a trade off, there are costs. The value of time, money, goods, and services given up in an economic choice. The #1 alternative is the Opportunity cost.  By doing this, I give up the opportunity to do that.  If we build the bridge, we can’t build the building.  If I buy the pizza, I can’t buy the book.

OptionsBenefitOpportunity Cost 1 hour of extra study time Grade of C on test 1 hour of sleep 2 nd hour of extra study time Grade of B on test 2 hours of sleep 3 rd hour of extra study time Grade of B+ on test 3 hours of sleep

 Benefits  Higher Income  More Job opportunities  Job opportunities in a career I enjoy  Job opportunities in more places  Opportunity Costs  Costs a LOT of money  Student loans for years  4 (or more) years of school  No guarantee of a job when I get out  What if I change my mind?