1. Basic economic concepts
Scarcity and Choice
Opportunity cost

2. Human wants
Unlimited wants

3. Resources used to produce goods / services to satisfy human wants
limited in supply
scarce: i.e. their quantities are insufficient to satisfy all human wants

4. Types of resources Natural resources: e.g. sunshine, rain, crude oil
Human resources: labour service
Man made resources: e.g. machines, equipments

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

6. Do they face scarcity problem?
United States
Hong Kong
North Korea
Africa

7. Is sea water scarce? Is it fixed in supply?
Do we want more sea water than we have?
Sea water is not scarce

8. Are they scarce? Sunshine in Thailand
A free sample of candies given at a shopping centre
Fresh air in a café with many smokers
Sand in the desert

9. Are they scarce? Sunshine in Thailand 
A free sample of candies given at a shopping centre 
Fresh air in a café with many smokers 
Sand in the desert 

10. Competition We compete for the use of limited resources
2 ways of competition
Price competition
Non price competition e.g. waiting, examination, lucky draw, violence…

11. Making choices 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?

13. What is economics?
It studies how we allocate the limited resources to satisfy unlimited wants

14. Opportunity cost
Opportunity cost is the highest-valued option forgone

15. Choice among options
Rank options according to a person’s preference order
Option 1 going to cinema
Option 2 going to sing karaoke
Option 3 sleeping at home

16. What is the cost of going to the cinema?
Going to sing karaoke (highest-valued option forgone)
We cannot choose option 2 and option 3 at the same time, we only forgo option 2 when we select option 1

17. Choosing a career / job Option 1 being an actress ( $10 Mn. p.a.)
Option being a nurse ( $ 0.5 Mn. p.a.) .
Income forgone being an actress < income forgone being a nurse
Cost being an actress < cost being a nurse
Choose the job with the lowest opportunity cost

18. More elderly found in queues
Before festivals, wait for gifts (rice, mooncakes, red envelopes etc)
In public clinics
Income forgone by elderly < income forgone by working persons
Cost of waiting by elderly < cost of waiting by working persons

19. Full cost
Option 1 going to a 1 hour concert and pays $200 for a ticket
Option 2 working in Park’n as a salesman earning $30 per hour
Option 3 working as a tutor earning $100 per hour
Full cost of attending the concert = price of ticket + income forgone (highest-valued option forgone)
Full cost of attending the concert = $200 + $100 = $300

20. Complimentary tickets
Going to Hong Kong Disneyland
Ticket : Free of charge
Money spent on food, transport..=$200
Income forgone = $500
Full cost of going for Disneyland (HK) =$700

21. Is Time a cost? Price of a mobile phone =$1 800 Search = one evening
Income forgone while searching = $200
Opportunity cost of buying the mobile phone is $2 000

22. Uses of a flat
Mrs Lo has the following options for her flat in Shatin :
Option Owner occupied
Option Vacant
Option Lease with a rental income $ per year
Suppose she chooses to live in her flat, what is her cost of living in that flat?

23. Social Cost Building a new railway $100 million
Creating pollution nearby (e.g. cutting trees, noises) $5 million
Social cost of building highway
= private cost + external cost
= $105 million

24. Questions
&
Answers

25. Q1 Answer : C. $430 Miss Cheng could spend two hours at a concert or
tutoring a student at $70 per hour. She could use the time
on painting instead and earn a total of $170. If the price of
the concert ticket is $250, what is the opportunity cost of
her choice of going to the concert?
A. $410
B. $420
C. $430
D $440
Answer :
C. $430

26. Q2 Answer: C. Cup and Bag Mary has accumulated 20 Coupons.
What is the opportunity cost to her
if she uses them to exchange for one
camera?
No. of coupons
Gifts 5 15 20
Cup
Bag
Camera
A.Cup
B. Bag
C. Cup and Bag
D. Cup or Bag
Answer:
C. Cup and Bag

27. Q3 Which of the following statements about scarcity is true? Answer: D
A. Once a choice is made, the problem of scarcity is solved.
B. A good is scarce if not everyone has it.
Which of the
following statements
about scarcity is true?
C. Scarcity means unlimited human wants.
D. Both rich people and poor people face the problem of scarcity.
Answer: D

28. Q4 Answer: Which of the following are opportunity
costs of attending school?
(1) Poor examination results
(2) Income forgone
(3) School fees
(4) Expenditure on dinners
A. (1) and (4) only
B. (1) and (3) only
C. (2) and (3) only
Answer:
D. (2) and (4) only
C. (2) and (3) only