II. Scarcity Means Making Choices
A. Scarcity exists because wants are unlimited and resources are limited.
which
B. Without enough resources to satisfy all of our wants, we must
wants we will satisfy.
III. Making Choices Means Incurring Opportunity Costs
A. Every
Bill we make has an opportunity cost.
WWW
cost is the most valued alternative you give up to do something.
C. A trade-off is another way of thinking about an opportunity cost. A trade-off means that you
can get more of one good only by giving up another good.
IV. One Diagram, Three Economic Concepts
A. A(n)
possibilities frontier (PPF) shows all possible combinations of
two goods that an economy can produce in a certain time period. (See Exhibit 1-2 on page 10 of
your textbook.)