Question

In your own words (don't quote the text), explain as completely as you can what an economist means by scarcity and opportunity cost. How do the 2 concepts relate? Link them. What do resources have to do with this? Are scarcity and shortage the same? Explain. What do economists mean when they cite opportunity cost and what's the connection between opportunity cost and scarcity? Why does economic theory argue that we can't "have it all"? Organization and a logical development is important.

Select 2 goods or services you produce. (IT MUST PERTAIN TO PRODUCTION, Not Consumption )that is very important to you and explain how scarcity forces you to make choices. What is the opportunity cost of producing each good. Keep in mind the economic definition of opportunity cost and answer in that context.These need to be expressed in relative prices. Also this section needs to include the resources you utilize in the production of each good,service or resource chosen and to categorize them as well. Graph. Draw a production possibilities curve (PPC) to graphically show the personal trade-offs you described on page 2. Title must include: your name, the 2 products, the time period of production. All axis must be labeled and indicate proper units of measure.

Remember that you're graphing 2 "GOODS" -- in other words, you should have some desirable output on each axis, NOT the scarce resources/input (i.e., your labor).

Answer 1

A) Scarcity, usually, stands for the limited availablilty of the commodity, which may be in demand in the market. It also includes an individual's lack of resources to buy commodities. Where as Oppurtunity Cost is the potential which benefits an individual, investor, or business misses out on when choosing one alternative over the other.

B) Scarcity and Oppurtnity Cost are related as the Scarcity is the condition where there is existance of not enough resources to satisfy all the wants of individuals or Society, where as, Oppurtunity Cost is the next highest valued alternative that is given up when a choice is made.

C) Resources have a choice of choosing a alternative in both the cases but have to sacrifice their most desired wants which may be expensive due to limited resources.

D) Economits have given a clear picture with regards to Scarcity and Oppurnity Cost as their analysis proves that Wants are unlimited and Resources are limited. The Individuals and the Society cannot satisfy all their wants with the limited resources, hence, Scarcity is the availability of the limited resources and Oppurtunity Cost is sacrificing the wants and choosing an effective alternative due to scarcity of resources.

E) Economic Theory's argument that 'We can't have it all' is absolutely accurate, as Resources are always limited and Human wants are unlimited. It has been proven multiple times with many Economists as well. To give an example, I can say, if there is a person who earns INR 50,000 a month and has to pay House rent, manage house hold expenses and take care of his family feels it difficult to satisfy all his wants as most of his income goes in managing his monthly expenses. Hence, he has to choose wisely what he has to buy and sacrifice the expensive wants and choose alternatives which are affordable and satisfy his wants.

F) Organization and logical development is very important. To explain, let us take an Organization has orders placed for manufacturing of 10000 shirts and 15000 Napkins. The Organization should go with production of 10,000 Shirts as there will be effective utilisation of available resources and getting more profits in comparision to manufacuring of 15,000 Napkins which are less beneficial.

G) Oppurtunity Cost of Shirts will be much helpful and cheaper in Comparision to Napkins as Shirts, though they consume little more cloth for their production but will satisfy the expected Profits. So, Oppurtunity cost for production is Napkins and the Oppurtunity cost for Napkins is the cloth used for manufacturing of Shirts.