Chapter 3 SG

Chapter 3 SG - Chapter 3 The Fundamental Economic Problem:...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 3 – The Fundamental Economic Problem: Scarcity and Choice Scarcity, Choice, and Opportunity Cost Resources are the instruments provided by nature or by people that are used to create goods and services. Natural resources include minerals, soil, water, and air. Labor is a scarce resource, partly because of time limitations (the day has only 24 hours) and partly because the number of skilled workers is limited. Factories and machines are resources made by people. These three types of resources are often referred to as land, labor, and capital. They are also called inputs or factors of production. Virtually all resources are scarce , meaning that humans have less of them than we would like. Therefore, choices must be made among a limited set of possibilities, in full recognition of the inescapable fact that a decision to have more of one thing means that we will have less of something else. The opportunity cost of any decision is the value of the next best alternative that the decision forces the decision maker to forgo. Opportunity Cost and Money Cost o If the market functions well, goods that have high opportunity costs will also have high money costs. In turn, goods that have low opportunity costs will also have low money costs. Optimal
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/15/2008 for the course ECON 011 taught by Professor Yezer during the Fall '07 term at GWU.

Page1 / 3

Chapter 3 SG - Chapter 3 The Fundamental Economic Problem:...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online