Scarcity, Trade-offs,
Cost, and
Opportunity Cost
In Economics,
Society, and
Government
Define
Economics-
Scarcity-
Trade offs-
Cost-
Opportunity Cost-
Constant Opportunity Cost
Constant Opportunity Cost
Pizza
Pizza
PPC 1
10
5
1
0
1
5
10
Calzones
The economy foregoes the same amount of one good when producing
more of the other.
Not realistic for entire economy because different resources are
better for the production of specific products. This can represent
specific products that use the same resources.
Calzones
10
0
9
1
8
2
7
3
6
4
5
5
4
6
3
7
2
8
1
9
0
10
Increasing Opportunity Cost
Increasing Opportunity Cost
Pizza
Computers
30
0
29
1
24
2
20
15
3
15
0
4
Pizza
A
30
25
10
B
5
0
1
2
3
4
Computers
The value of a foregone product increases as the production of good increases. Specifically relates to the
allocation of resources to their best purposes.
A
B
In this section the best resources at making computers are reallocated to computers and the best at making pizzas
stay with pizza
By this point all resources are being allocated to the production of computers, even those resources that least
productive at making robots and best at producing pizza.- Common occurrence in Command Economies.
Can Liberty vs. Authority be viewed in the same manner?
“In all governments, there is a perpetual struggle, open or
secret, between Authority and Liberty; and neither of them
can ever absolutely prevail in the contest. A great sacrifice of
liberty must necessarily be made in every government; yet
even the authority, which confines liberty, can never, and
perhaps ought never, in any constitution, to become quite
entire and uncontrollable.”
- David Hume
“The pursuit of one end necessarily entails opportunity costs
in relation to other.”
- Isaiah Berlin British Political Theorist
Opportunity Cost of Liberty and Authority
Liberty-(% not directly impacted)
100
80
60
40
20
0
0
No Flag
Burning
No Anti Obama speech
(bumper stickers, blogs)
No Anti
government
speech
Authority – actions to increase in government power
No questioning
of the
government
Opportunity Cost of Liberty and Authority
Beware of the Slippery Slope!!!!!
Liberty-(% not directly impacted)
100
80
60
40
20
0
0
No Flag
Burning
No Anti Obama
bumper stickers
or public speech
No Anti government
speech public
Authority – actions to increase in government power
No questioning
of the
government
Define
Economics- The allocation of scarce resources that have alternative uses.
Scarcity- having unlimited wants and needs in a world with limited resources.
Trade offs- decision that involves giving up something to gain something else.
Cost- The value of a product’s alternative uses.
Opportunity Cost- highest value alternative given up.
Total Cost= Direct cost (out of pocket) + Opportunity Cost
Constant Opportunity Cost
Constant Opportunity Cost
Pizza
Pizza
PPC 1
10
5
1
0
1
5
10
Calzones
The economy foregoes the same amount of one good when producing
more of the other.
Not realistic for entire economy because different resources are
better for the production of specific products. This can represent
specific products that use the same resources.
Calzones
10
0
9
1
8
2
7
3
6
4
5
5
4
6
3
7
2
8
1
9
0
10
Increasing Opportunity Cost
Pizza
Increasing Opportunity Cost
Pizza
A
Robots
30
0
29
1
24
2
20
15
3
15
0
4
30
25
10
B
5
0
1
2
3
4
Robots
The value of a foregone product increases as the production of good increases. Specifically relates to the
allocation of resources to their best purposes.
A
B
In this section the best resources at making robots are reallocated to robots and the best at making pizzas stay with
pizza
By this point all resources are being allocated to the production of robots, even those resources that least
productive at making robots and best at producing pizza.- Common occurrence in Command Economies.
Opportunity Cost of Liberty and Authority
Liberty-(% not directly impacted)
100
80
60
40
20
0
0
No Flag
Burning
No Anti
Obama
speech
No Anti
government
speech
Authority – actions to increase in government power
No questioning
of the
government
Increasing Opportunity Cost
Cupcakes
Increasing Opportunity Cost
Cupcakes
A
TV’s
300
0
290
1
240
2
200
150
3
150
0
4
300
250
100
B
50
0
1
2
3
4
TV’s