Chapter 2, Problem 1DQ

To determine

The choice between now and one hundred years in the future.

Explanation of Solution

The extensive use of oil in today’s world is important because in the modern economy, almost all economic activities are dependent on oil. Moreover, there are many others uses of oil as well.

So, the welfare of the people would be degraded, and there will be stagnation in the economy. No import and export of goods over long distances would be possible, as transportation activity is totally dependent on the availability of fuel.

There are however opportunity costs associated with using alternatives to oil If oil is replaced with ethanol, then it wouldn't cause any damage to the environment and there would be a need to increase the cultivation of sugarcane, as ethanol is produced from sugarcane.

To increase the quantity of land for the cultivation of sugarcane, it would be required to decrease the quantity of land for the cultivation for other crops like rice, wheat, and maize. Therefore, it is important to decide whether ethanol is more important than other crops or not.Thus, there are two aspects that are required to be considered, which are scarcity and the alternative uses of oil.

Economics Concept Introduction

Concept introduction:

Opportunity cost:

If one alternative is chosen over another alternative, then there is a cost involved in choosing the respective alternative i.e. the cost of the foregone alternative. This foregone cost is known as the opportunity cost.