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Scarce Resources

If you imagine the earth as a round ball then it is possible to see that only a limited amount of materials can be squeezed from it. All of these scarce materials are called resources. e.g oil, coal

Unlimited Wants

Human beings are by our very nature insatiable. No sooner do we have one thing than we desire another. Our desires are infinite.

Economic Choice

The scarce resources available to us have alternative uses and as we are unable to produce all the goods and services we would like we are forced to make choices between these alternate uses. This is called an economic choice.

When we make a choice between one use and another we must give something up. What we give up is the next best alternative use and this is known as the opportunity cost.

Opportunity cost is the benefit lost from the alternative forgone.

When making an economic choice we are often faced with a conflict of opinion. The final decision about which alternative to choose is generally made based on our own opinion and values. This decision is known as a value judgement.

We have unlimited wants but scarce resources which leads us to make economic choices between alternative and often conflicting uses, which in turn creates opportunity costs.