Every society faces the problem of scarcity—there are limited resources but unlimited wants. This means people, businesses, and governments must make choices about how to allocate resources efficiently.
These questions help shape different economic systems, from free markets to centrally planned economies.
Whenever a choice is made, the next best alternative that is given up is the opportunity cost. It's a key concept that helps individuals and nations make better economic decisions.
Understanding these basics lays the foundation for exploring more complex macroeconomic topics.
Deciding to spend money on a new phone instead of saving for college tuition.
A government allocating more funds to healthcare rather than military spending.
Scarcity forces choices, leading to opportunity costs and the need to allocate limited resources efficiently.