The Three Concepts Of Scarcity, Choice And Opportunity Cost

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Recommended: Examine the importance of scarcity and choice in economics

There are three concepts i.e. scarcity, choice and opportunity cost that explains this view. The basic assumption is that people cannot get everything they want, and have to do without it. This scarcity results in a choice, which comes at a cost. This is the opportunity cost, which is the next best alternative declined. This cost is not measured in financial terms. The concept of scarcity choice and opportunity cost can be graphically depicted by using the production possibility frontier. The choice between either transport or cost for other goods and services (OGS) can be produced in finite quantities. In explaining the production possibility frontier, using the same content as above, If the cost of other goods and services increases from OGS1 to OGS 2 on the graph, transport cost decreased from T1 to T2. If the OGS decreases from OGS2 to OGS3, then transport cost increases from T1 to T2. The reduction represents the opportunity cost. Therefore point ‘g’ on the graph on the OGS axis is attainable. It presents a position of inefficiency as society is not utilizing the full potential...

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