Professional Documents
Culture Documents
Human wants
Unlimited wants
Resources
used to produce goods / services to satisfy human wants
limited in supply
scarce: i.e. their quantities are insufficient to satisfy all human wants
Types of resources
Natural resources: e.g. sunshine, rain, crude oil
Human resources: labour service
Scarcity
Meaning: Resources are insufficient to satisfy ALL human wants A relative concept: we want more than we have Basic economic problem in human societies
Competition
We compete for the use of limited resources
2 ways of competition Price competition Non price competition e.g. waiting, examination, lucky draw, violence
Making choices
Which restaurant will you go for lunch?
What would you like to study at university? What will you buy with $100? CD or dress ?
What is economics?
It studies how we allocate the limited resources to satisfy unlimited wants
Opportunity cost
Opportunity cost is the highest-valued option forgone
Full cost
Option 1 going to a 1 hour concert and pays $200 for a ticket Option 2 working in Parkn as a salesman earning $30 per hour Option 3 working as a tutor earning $100 per hour Full cost of attending the concert = price of ticket + income forgone (highest-valued option forgone) Full cost of attending the concert = $200 +
Complimentary tickets
Going to Hong Kong Disneyland Ticket : Free of charge Money spent on food, transport..=$200 Income forgone = $500
Is Time a cost?
Price of a mobile phone =$1 800 Search = one evening Income forgone while searching = $200 Opportunity cost of buying the mobile phone is $2 000
Uses of a flat
Mrs Lo has the following options for her flat in Shatin :
Option 1 Owner occupied Option 2 Vacant Option 3 Lease with a rental income $50 000 per year Suppose she chooses to live in her flat, what is her cost of living in that flat?
Social Cost
Building a new railway $100 million Creating pollution nearby (e.g. cutting trees, noises) $5 million Social cost of building highway = private cost + external cost = $105 million
Miss Cheng could spend two hours at a concert or tutoring a student at $70 per hour. She could use the time on painting instead and earn a total of $170. If the price of the concert ticket is $250, what is the opportunity cost of her choice of going to the concert?
A. $410 B. $420 C. $430 D $440
No. of coupons
Gifts
5 15 20
Mary has accumulated 20 Coupons. What is the opportunity cost to her if she uses them to exchange for one camera?
A.Cup
B. Bag
D. Cup or Bag
A. Once a choice is made, the problem of scarcity is solved. B. A good is scarce if not everyone has it. C. Scarcity means unlimited human wants. D. Both rich people and poor people face the problem of scarcity.
Answer: D