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Q. Explain the link between basic economic problem and opporunity cost. |8|
My ans: In any society, people's desire for goods, i.e the quantity of goods people would take in a given period of time if good could be had for nothing, exceeds the flow of goods in a given period of time. Hence, it is impossible to fulfill the desire for goods by all people at the same time. This leads to the basic economic problem of scarcity.
The most obvious implication of scarcity is the need to choose. As there are not enough resources to do everything, people must decide what will be done with the resources at their disposal. Every desire we satisfy by making a choice "costs" us the opportunity cost of satisfying a different desire. This opportunity lost is known as the opportunity cost, which is defined as the the most highly valued alternative forgone.
Clearly, if the flow of goods in a period of time was enough to satisfy all our desires, in other words, if the world was bereft of the basic economic problem of scarcity, no opportunity cost would be incurred.
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I didn't add any examples nor did I add the PPc diagram. How much will I get for answer and how can I improve it?
My ans: In any society, people's desire for goods, i.e the quantity of goods people would take in a given period of time if good could be had for nothing, exceeds the flow of goods in a given period of time. Hence, it is impossible to fulfill the desire for goods by all people at the same time. This leads to the basic economic problem of scarcity.
The most obvious implication of scarcity is the need to choose. As there are not enough resources to do everything, people must decide what will be done with the resources at their disposal. Every desire we satisfy by making a choice "costs" us the opportunity cost of satisfying a different desire. This opportunity lost is known as the opportunity cost, which is defined as the the most highly valued alternative forgone.
Clearly, if the flow of goods in a period of time was enough to satisfy all our desires, in other words, if the world was bereft of the basic economic problem of scarcity, no opportunity cost would be incurred.
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I didn't add any examples nor did I add the PPc diagram. How much will I get for answer and how can I improve it?