ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The opportunity cost of a choice is the value of the best alternative given up. Scarcity is the condition of not being able to have all of the goods and services one wants. It exists because human wants for goods and services exceed the quantity of goods and services that can be produced using all available resources.

Detailed explanation-2: -All economies must answer basic questions like what goods and services to produce, how to produce these goods and services, and how to distribute the goods and services – using their scarce resources.

Detailed explanation-3: -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.

Detailed explanation-4: -Scarcity exists because human wants exceed the capacity of available resources. This basic problem of scarcity is faced by all individuals, organizations, businesses and governments.