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Hi! I'm Studyfin, your learning buddy. Today we will explore how we make choices when we cannot have everything we want!
Have you ever wanted a new game and a cool book, but only had enough money for one? This is because of scarcity. Scarcity means there is not enough of something to satisfy everyone's wants.
Because things are scarce, we must make choices. When you choose one thing, you have to give up something else. The thing you give up is called your opportunity cost. It is your second-best choice.
Let us model this thinking. Imagine you have one free hour after school. You want to play soccer with friends, and you also want to paint a picture. You cannot do both at the same time because your time is scarce.
If you choose to play soccer, that is your choice. The painting is the opportunity cost. You gave up the fun of painting to enjoy the soccer game with your friends.
Taylor has ten dollars to spend at the school fair. A giant slide ticket costs ten dollars. A box of warm popcorn also costs ten dollars. Taylor chooses to buy the giant slide ticket. What is the scarce resource, the choice, and the opportunity cost?
- Identify the resource that is limited. Taylor only has ten dollars. This means money is the scarce resource.
- Look at what Taylor decided to buy. Taylor bought the giant slide ticket. This is the choice.
- Find the next best option that Taylor had to give up. Taylor could not buy the popcorn. Therefore, the box of warm popcorn is the opportunity cost.