Questions On Economics : How People Make Choices Using The Resources They Have Available
1. Scarcity: What are the wants and constraints of those involved?
2. Opportunity Cost: What are the trade-offs?
3. Incentives: How will others respond?
4. Efficiency: Why isn’t everyone already doing it?
Scarcity is defined as a person’s wants being greater than their available resources. People face scarcity everyday due to limited resources such as travel, limited income, and not enough time to do everything they want to do. Opportunity costs is one way to measure the cost of something. Determining the alternative ways to spend the same out of money in different ways based on your optimal utility. The profit of the next best alternative is the opportunity cost of the original choice. No matter what one chooses to do, they are always giving up something else in return. The opportunity cost of attending college may be the loss of income a student could have earned in the workforce rather than the cost of tuition, books, and other required items to attend college. An incentive can either be positive or negative. A positive incentive makes people more likely to do something, which lowers their opportunity costs. AN example would include an instructor who says he will give every student in class 5 extra bonus points if at…