Why Resources Are Limited

We live in a world where our wants seem endless, but the resources to satisfy them are limited. This fundamental problem is called scarcity. Everything from time and money to raw materials and labor is finite, so we must make choices about how to use them.

The Trade-Offs We Make

Whenever you choose one thing, you give up something else. The value of the next best alternative you forgo is called the opportunity cost. Understanding opportunity cost helps you make better decisions, whether it's deciding between studying for an exam or hanging out with friends, or how a business allocates its money.

Everyday Applications

• Choosing to spend $10 on a movie ticket means you can't use that $10 for a pizza.
• Governments deciding whether to build a new park or fund a new library must consider what they are giving up.

Why It Matters

Recognizing scarcity and opportunity cost helps individuals, businesses, and societies make smarter, more informed decisions.