The Theory of Scarcity, Choice and Opportunity Cost

SCARCITY

The term scarcity is used to describe the limited nature of economic resources.

CHOICE

Scarcity of economic resources makes choice essential such that human wants can’t be satisfied. The choice is made with a scale of preference.

OPPORTUNITY COST

This is the cost of a foregone opportunity. This happens because the limited resources (money) e.g. suppose one has 50 kshs and proposed to buy a loaf and book. Hecannot be able to get the two commodities because of cost hence one has to choose to forego the loaf and buy a book. The cost of foregone item is the opportunity cost.



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