Some Basic Economic Concepts
for Personal Wealth Management
Economics

The social science concerned with
distributing scarce resources among
alternative ends.
Economist


The word economists is taken from
the Greek word oikonomia, which
means "house management".
It originally applied to persons who
were good administrators within a
community, business or home.
The Economic Problem

The problem of having unlimited
wants but limited resources with
which to satisfy them.
Scarcity leads to Choice


choices and trade-offs are
necessary
this is the core of many personal
wealth decisions
The Concept of Opportunity Cost

The value of the next best
alternative foregone
The Concept of Opportunity Cost

For example, what is your
opportunity cost of attending this
class today?

What is the opportunity cost of
taking $500 from your savings
account to go to Vancouver for the
weekend?


The concept of opportunity cost is
useful in making decisions.
It illustrates that there is “no free
lunch”

Trade-offs are required.