SCARCITY AND

OPPORTUNITY COST
ACTIVITY
• Scenario:
• You are on a desert island. Alone. You must survive. The
island has only one food source that you have found:
pineapples. It takes you 2 hours to harvest and cut up 1
pineapple (you have no knife!). You also want to build your
shelter. Each piece takes you 3 hours to build. You have only
12 hours of sunlight and need to complete your tasks by
sundown. How will you spend your hours? Record your
decision on a separate sheet of paper.
• Answer the following questions:
• 1. Why did you spend your hours the way you chose?
• 2. What limits did you face? What tradeoffs did you make?
• 3. How does scarcity (limited resources) affect our
economy and ability to produce?
SCARCITY

• the inability to satisfy unlimited human wants with

limited resources, that is, when we CANNOT
HAVE ALL that we want or need.
OPPORTUNITY COST

• amount of one good that must be given up to get

more of another. The opportunity cost of any
decision is the value of benefits forgone from
alternative uses of resources.
1.You were given the chance to work on a summer job
for 20 days at P200 per day, but you chose to spend
your summer vacation watching television. Is there an
opportunity wasted in this situation? How much is the
opportunity cost?
THE PRODUCTION POSSIBILITIES
CURVE (PPC)
• The production possibilities curve or production
possibilities frontier is a simplified model of an economy
showing the maximum amounts of two goods that can be
produced at a point in time using all available resources,
including the best known production technology. The
PPC depicts society’s menu of choices
LAW OF INCREASING COSTS
• When society prefers one commodity as against another,
provided it is operating along the production frontier, it can
only produce one commodity at the expense of the other. As
society desires more and more of one good, it is most costly to
obtain it in terms of the other good; hence increasing costs.
As more and more Roads is given up for Rice, the (relative)
cost of Roads (expressed in terms of Rice) becomes more
expensive.
ECONOMIC GROWTH AND THE
PRODUCTION POSSIBILITIES
CURVE