Basic Concepts
In a nutshell: Scarcity means limited resources, so every choice has a cost—opportunity cost is what you give up.
## Why We Can't Have It All
Economics starts with a simple truth: resources are limited, but our wants are unlimited. This is called *scarcity*. Because of scarcity, we have to make choices, and every choice involves a cost—the value of what you give up. This is known as *opportunity cost*.
### Making Choices
Whenever you choose one thing, you’re giving up something else. Economists use this idea to help explain how individuals, businesses, and even governments make decisions.
### Everyday Decisions
Whether you're deciding how to spend your allowance, what movie to watch, or how to use your free time, scarcity and opportunity cost are always involved.
### Real World Connections
Even countries face scarcity. For example, if a government spends money on defense, that money can't be used for education or healthcare. The opportunity cost is the value of those foregone services.
### Quick Recap
Scarcity forces us to make decisions, and opportunity cost is what we give up when we choose one thing over another.
Examples
- Buying a video game instead of saving money for a concert means the concert is your opportunity cost.
- Using land to grow corn rather than wheat means the wheat is the opportunity cost.
Key terms
- Scarcity
- The condition of having limited resources to meet unlimited wants.
- Opportunity Cost
- The value of the next best alternative that is given up when a choice is made.