Explain the concept of scarcity, choice and opportunity cost with the help of PPC
Dear Student,
The three concepts can be explained in terms of PPC as follows:
We know that in an economy the resources are limited in relation to the wants that are unlimited. That is, we say that there is scarcity of resources. Moreover, the given resources have alternative uses. So, if the resources are employed in the production of one good then the production of other goods would have to be given up. In other words, a choice has to be made among the various goods and services for which the given resources can be utilised. In other words, if the resources are utilised in the production of one good then the production of some other goods would have to sacrificed.
The amount of one good sacrificed in order to produce each additional unit of the other good is called as opportunity cost.
The three concepts can be explained in terms of PPC as follows:
We know that in an economy the resources are limited in relation to the wants that are unlimited. That is, we say that there is scarcity of resources. Moreover, the given resources have alternative uses. So, if the resources are employed in the production of one good then the production of other goods would have to be given up. In other words, a choice has to be made among the various goods and services for which the given resources can be utilised. In other words, if the resources are utilised in the production of one good then the production of some other goods would have to sacrificed.
The amount of one good sacrificed in order to produce each additional unit of the other good is called as opportunity cost.