The choices that we make have costs - this is true on both a large scale when we are looking at society's choices that affect many people, and also on an individual level. Since a country does not have unlimited resources available, society is faced with making decisions about what should be produced that will have the best impact on the economy. These choices have an opportunity cost, meaning that we have to examine not only the actual cost of the goods or services that we have decided to produce, but also the value of the alternatives that have been given up to produce these.
Scarcity can be illustrated on a production possibilities graph. This type of graph assists in showing two possibilities for production in a specific time period. It will depict that when more is produced of one item, less can be produced of the other.
This type of scarcity can also be seen on an individual level. For example, in order to make the decision to return to school, I had to assess the costs that would affect other areas of my life. Because I work full-time, I only have a certain amount of time available for other areas of my life. I have to a lot a certain amount of time to housework, gardening, errands, etc. Returning to school means that I have less time to accomplish those things, as well as less time for hobbies. I had to weigh the costs to determine what was most important to me in order to make the decision to return to school. We are all faced with these decisions, in some form or another. By analysing production possibilities and scarcity, we are able to make educated choices.
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