Opportunity costs

• Real Cost & Tradeoffs

  • Real Cost

    • The total resources (human, capital, natural) used in production.

  • Tradeoffs

    • When people make a choice between two possible uses of their resources, they are making a tradeoff between them.

• The Reason: Scarcity

  • Unlimited wants vs. Limited resources

    • Limited resources (time, money, land, labour).

  • Because we can't have everything, every choice has an opportunity cost.

• Application: How the Economy Works

  • Economic Models

  • The Fundamental Societal Tradeoff

    • Consumer Goods vs Capital Goods

• The Ultimate Conclusion

  • Economics is the study of these trade-offs

  • By understanding opportunity cost, individuals and societies can make smarter, more informed decisions that best align with their goals.