Scarcity: Economics and Marginal Benefit

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sMarginal Benefit / Cost and Scarcity Paper Uploaded by 989 on Aug 1, 2005

-------------------------------------------------------------------------------- Marginal Benefit / Cost and Scarcity Paper

Define the concept of scarcity: Scarcity: The goods available are too few to satisfy individuals' desires. Scarcity is a central concept in economics. Resources are scarce if any individual would prefer to have more of that good or service than they already have. Most goods and services are scarce - those that are not are known as free goods. Where goods are scarce it is necessary for society to make choices as to how they are allocated and used. Economists study (among other things) how societies perform the optimal
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Definition: Opportunity cost of an action is the highest-valued alternative forgone. The opportunity cost of under taking an activity is the benefit forgone by undertaking that activity. The benefit forgone is the benefit that you might have gained from choosing the next-best alternative. To obtain the benefit of something, you must give up (forgo) something else--namely, the next best alternative. All activities that have a next-best alternative have an opportunity cost. Opportunity cost is the basis of cost/benefit economic reasoning; it is the benefit forgone, or the cost, of the next-best alternative to the activity you've chosen. In economic reasoning, that cost is less than the benefit of what you've chosen. An example of this would be: Suppose you have the choice of seeing a movie, playing a game of tennis, or reading a book. If you choose to see a movie then you cannot play a game of tennis or read a book. The opportunity cost of seeing the movie is the best alternative you forgo. If the best alternative is reading a book, then the opportunity cost of seeing the movie is reading a book. Benefit: (1.) advantage: something that has a good effect or promotes well-being They eventually reaped the benefits of all their hard work.(2.) business extra employee compensation: compensation over and above salary given to some employees or partially paid for by the employing company, e.g., health insurance, retirement pay, or stock
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