ECONOMICS

THROUGH

ECONOMIC
MODELS

IS

STUDY

SCARCITY

IMPLIES
ANALYSIS

STATE

OF

OF

ECONOMIC
PROBLEM

WITH

OPPORTUNITY COST (INVESTOPEDIA)

AN OPPORTUNITY COST REFERS TO A BENEFIT THAT A
PERSON COULD HAVE RECEIVED, BUT GAVE UP, TO TAKE
ANOTHER COURSE OF ACTION. STATED DIFFERENTLY, AN
OPPORTUNITY COST REPRESENTS AN ALTERNATRIVE GIVEN
UP WHEN A DECISION IS MADE. THIS COST IS THEREFORE
MOST RELEVANT FOR TWO MUTUALLY EXCLUSIVE EVENTS,
WHEREBY CHOOSING ONE EVENT, A PERSON CANNOT CHOOSE
THE OTHER
SCARCITY: REFERS TO THE BASIC ECONOMIC PROBLEM, THE GAP
BETWEEN LIMITED RESOURCES AND THEORETICALLY LIMITED WANTS.
THIS SITUATION REQUIRES PEOPLE TO MAKE DECISIONS ABOUT HOW
TO ALLOCATE RESOURCES EFFICIENTLY, IN ORDER TO SATISFY NEEDDS
AND AS MANY ADDTIONAL WANT AT POSSIBLE. ANY RESOURCE THAT
HAS A NON-ZERO COST TO CONSUME IS SCARCE TO SOME DEGREE,
BUT WHAT MATTERS IN PRACTICE IS RELATIVE SCARCITY
THE SCARCITY PRINCIPLE IS AN ECONOMIC PRINCIPLE IN WHICH A
LIMITED SUPPLY OF A GOOD, COUPLED WITH A GIGH DEMAND RESULTS
IN A MISMARCH BETWEEEN THE DESIDRED SUPPLE AND DEMAND
EQUILIBRIUM

MARKET
MECHANISM
SELLERS

MARKET

IMPLIES

OPPORTUNITY
COST

SOLUTION

AS

THROUGH

CHOICES

OF

BUYERS