Scarcity, choice and opportunity costs
Opportunity cost is the cost of any action or decision measured in terms of the highest valued alternative foregone.
The central economic problem all societies face is the problem of scarcity. Scarcity is a situation in which available resources are unable to produce enough of the goods and services that people desire to satisfy all their wants. In short, there are limited resources to satisfy unlimited wants.
Due to the problem of scarcity, every time a choice is made to use a resource for a particular purpose, it means that the opportunity of using it
for some other purpose is lost. In other words, there is a sacrifice of alternatives as other wants cannot be satisfied. Hence, an opportunity cost is incurred.
The PPC shows all the maximum possible combinations of consumer goods and capital goods that a country can produce within a specific
period of time with all its resources fully and efficiently employed and a given state of technology.
Video Duration: 1 hour 30 minutes