What you will be able to do
identify a scarce resource; choose among alternatives; name the opportunity cost of a choice
Scarcity and Opportunity Cost
How do scarcity and opportunity cost help explain choices?
Activate what you know
Imagine having thirty minutes for either the playground or the art table. If you choose one, what do you give up for that time?
- scarcitythe condition of having limited resources compared with all the ways people want to use them
- resourcesomething useful for meeting needs or producing goods and services
- choicea decision among alternatives
- alternativeone possible option
- opportunity costthe next-best alternative given up when a choice is made
- trade-offwhat is gained and given up in a choice
1
Limited Resources Create Choices
Time, money, land, tools, and materials are limited. People can imagine more uses for them than can happen at once. This condition is scarcity, and it affects individuals, families, businesses, and governments. Scarcity does not mean nothing is available, and it does not mean every person has the same amount. It means using a resource one way leaves less of it for another use. A careful choice compares alternatives and goals
2
Every Choice Has a Next-Best Alternative
Suppose the school values fresh food lessons most and chooses the garden. If the reading space was the next-best alternative, that reading space is the opportunity cost. The vegetables are a benefit of the chosen option, not its opportunity cost. Different decision-makers may rank alternatives differently because they have different goals and information. Good reasoning states the goal, identifies the limited resource, names the choice, and explains what next-best option was given up
Scarcity Is About Limited Resources
Wanting two things is not enough to show scarcity. Identify the limited resource–such as time, space, money, or materials–that makes a choice necessary
Use the Choice Frame
The scarce resource is ____. I chose ____ because ____. My opportunity cost is ____ because it was my next-best alternative
Cost Is Not Only Money
Opportunity cost may be time, space, an activity, or another benefit. It is the next-best alternative given up, even when no money is spent
Choose for a Fictional Class
The class has one hour for either a stream walk, a museum video, or a map game. Rank the three, choose one, and circle the opportunity cost
Scarcity means resources are limited compared with possible uses. A choice selects one alternative, and its opportunity cost is the next-best alternative given up
Practice and answer guide
Work through all 8 questions. Open an answer only after you have written or explained your response.
- 1. A class has one hour and three possible activities. What is the scarce resource? A. time B. every activity C. the calendar date
Check answer
Time
- 2. What is opportunity cost? A. the next-best alternative given up B. every possible choice C. only the money spent
Check answer
The next-best alternative given up
- 3. A town has one empty lot for either a park or a clinic. If it chooses the clinic and the park was next best, what is the opportunity cost?
Check answer
The park, because it was the next-best alternative not chosen
- 4. Name one benefit of the chosen clinic. Is that benefit the opportunity cost? Explain
Check answer
A benefit could be nearby access to health services. No; that is a gain from the chosen option, while opportunity cost is the next-best option given up
- 5. Draw three alternatives for using one scarce classroom resource
Check answer
Answers vary. All three alternatives must compete for the same clearly named resource, such as one hour, one wall, or one set of materials
- 6. Rank your three alternatives and identify your choice and next-best alternative
Check answer
Answers vary. The response must rank the options so the next-best unchosen alternative is clear
- 7. Why might two people choose differently when facing the same scarcity?
Check answer
They may have different goals, needs, information, or rankings of the alternatives
- 8. Complete: The scarce resource is ____. I choose ____. My opportunity cost is ____
Check answer
Answers vary. All blanks must form one consistent choice: a limited resource, a selected use, and the next-best use not selected