What is Scarcity and Opportunity Cost?
Individuals, institutions, and society make choices among scarce resources. Demand and needs from individuals, institutions and society far exceeds the resources available. In economics scarcity exists because resources are limited. Because resources are scarce we must decide what we want to consumer and what we want to give up. In economics nothing is free. There is a cost to everything. The cost may be explicit or implicit. Explicit costs are those expenditures a firm makes to others that supply resources to the firm. Business accounting expenses of a firm are considered explicit costs. Depending on the type of business the business expenses might be expenditures for labor, materials, products, machinery, utilities, rent, etc. Implicit costs are intangible cost of the firm. Implicit costs are considered the opportunity costs a firm could make on its own resources. When a firm gives up something by using its own resources there are implicit cost. An example of implicit cost would be i
