Explain briefly but clearly the concepts of scarcity and opportunity cost. Provide an example of opportunity cost from either your personal or professional experiences. Remember to include explicit costs (able to be measured) and also implicit costs. Then provide an example of an opportunity cost a...
Explain briefly but clearly the concepts of scarcity and opportunity cost. Provide an example of
opportunity cost from either your personal or professional experiences. Remember to include explicit
costs (able to be measured) and also implicit costs. Then provide an example of an opportunity cost
a whole country experiences when society or the government has made a choice.
“Scarcity refers to resources being finite and limited. Scarcity means we have to decide how and
what to produce from these limited resources. It means there is a constant opportunity cost
involved in making economic decisions. Scarcity is one of the fundamental issues in economics”
(Pettinger , 2019).
The concept of scarcity refers to resources being limited and finite.This means that we don’t
produce as much as we consume or that there are not enough resources to acquire the necessary
needs.For example food ,shelter ,labour or raw materials , all these exist but are limited.
Explicit cost is a cost that involves monetary payment.
An example of explicit cost is paying for employees or utility bills.
Implicit costs are costs that occur without the use of money and are allocated for a specific
purpose.
An example of an implicit cost includes new employee training in the company , maintenance of
utilities.
Opportunity cost is the cost of giving up one thing for the next best alternative.By sacrificing one
thing and then gaining one thing that is a better or just a different choice than the other.
A Personal example of Opportunity Cost - I had an opportunity to work two jobs for a month and
the sacrifice I had to make was giving up sleep for a few hours in order to make a bit more
money.
I chose to make R1500 rands as an opportunity cost per week and gave up 15 hours of sleep per
week.
An example of an opportunity cost that everyone experiences when the government makes a
choice is allowing people to work during a pandemic.It’s giving up staying at home and not
being exposed to the virus by going to work but gaining by boosting the economy and hopefully
reducing the scarcity of resources.
Word count : 300
References
OpenStax College. (2016). Principles of economics. http://cnx.org/contents/69619d2b-68f0-44b0-
b074-a9b2bf90b2c6@11.330 .Chapter 1
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