Question

Why is economics defined as the study of scarcity?

How is opportunity cost calculated for input? For output?

Answer 1

Economics is the study of how society allocates scare resources and goods .As we know resources are the inputs that society uses to produce output, called capital goods . Resources include input such as labour, capital and land.Goods include products such as food, clothing and housing as well as services such as those provided by barbers,doctors and police officers.These resources and goods are considered scare because of society's tendency to demand more resources and goods then are available.

For output problem we look at if one individual can produce more output with the same resources as the other.if one individual, nation can produce a good at a lower opportunity cost then other this comes into play when one individual has the absolute advantage in both.for opportunity cost put the output of each product over the output of other product for the same person.thus makes a fraction.

While an input method we divided the input required for each product into the input for the other product then take the one with lowest opportunity cost.input problem states that it takes a certain amount of input to get a given product.