Answer to Question #329194 in Macroeconomics for abel

Question

Define the concept of scarcity. Explain the significance of this concept in relation to the

concept of opportunity cost. Is opportunity cost and sacrifice the same thing? Would you

say that a sacrifice represents the cost of a particular decision?

Answer 1

Scarcity is one of the key concepts of economics. It means that the demand for a good or service is greater than the availability of the good or service. Therefore, scarcity can limit the choices available to the consumers who ultimately make up the economy.

When economists refer to the “opportunity cost” of a resource, they mean the value of the next-highest-valued alternative use of that resource. If, for example, you spend time and money going to a movie, you cannot spend that time at home reading a book, and you can't spend the money on something else.