Question

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. Please answer in 150 words or more.

Answer 1

Scarcity: The fundamental Economic problem which has to deal with limited resources and unlimited human wants. Scarcity states that there are very less resources in the society where as the people wants are more than these resources.

Opportunity cost: Choosing one alternative over the other and forgoing the benefits of that left alternative is called opportunity cost

Ex: I have to choose between buying an apple iPhone or Sony Mobile. I bought an apple IpiPho which means I left the benefit which I get from having Sony Mobile.

Explicit cost are the payment made by the company for the usage of factors of production where as implicit cost are the usage of owner money.

Ex: :

Wages , rent are explicit cost

Capital of owner is implicit cost

Government spending money for building a government museum is the opportunity cost of spending on welfare of the people in the country.