Some Basic Economic Concepts for Personal Wealth Management

Economics  The social science concerned with distributing scarce resources among alternative ends.

Economist  The word economists is taken from the Greek word oikonomia, which means "house management".  It originally applied to persons who were good administrators within a community, business or home.

The Economic Problem  The problem of having unlimited wants but limited resources with which to satisfy them.

Scarcity leads to Choice  choices and trade-offs are necessary  this is the core of many personal wealth decisions

The Concept of Opportunity Cost  The value of the next best alternative foregone

The Concept of Opportunity Cost  For example, what is your opportunity cost of attending this class today?

 What is the opportunity cost of taking $500 from your savings account to go to Vancouver for the weekend?

 The concept of opportunity cost is useful in making decisions.  It illustrates that there is “no free lunch”

 Trade-offs are required.