Economics

Opportunity Cost: Consumers When individuals produce goods or services, they normally trade (exchange) most of them to obtain other more desired goods or services. When doing this scarcity comes into play. As consumers you have many different goods or services to choose from, but limited income (from your own production) available to obtain the goods and services. Because of scarcity, consumers must choose which goods and services they wish to purchase. When they purchase one good or service, they are giving up the chance to buy another. The best single alternative not chosen is your opportunity cost.

Have you ever purchased something at a store? Would you like to have a store in our classroom? Look at the table-there is a major problem here. What is it?

Store There are no products in the store! Would you like to help make some products for our store? You are now producers (people who produce or make products). Use your productive resources to make your product. Make sure it is good.

Opportunity Cost: Producers Producers are also confronted with the problem of scarcity. The productive resources that producers get can be used to make lots of goods and services. The producers have to choose which goods and services to produce. When they use their productive resources to produce one thing, they choose to give up making another. The best alternative that producers do not choose is their opportunity cost.

Trade In this day, people rarely produce all the goods and services they want and need themselves. Because of this they must trade (exchange) with other to obtain the goods and services they want. Voluntary trade benefits both parties. Trade without money is known as direct exchange (bartering). The use of money allows us to use indirect trade. This is where people accept money for their own products and then use that money to purchase other goods and services they desire.

Money Using money (indirect exchange) is more efficient than bartering (direct exchange).