Wednesday, May 6, 2020

Essay on Opportunity Cost And The Free Market - 1736 Words

OPPORTUNITY COST THE FREE MARKET Scarcity is one of the most basic and crucial points to understand in microeconomics.1Scarcity means that we cannot have all the needs and wants to satisfy our desires. Scarcity can be applied to almost anything. Due to the scarcity of products we must make a choice of what we want. We must choose whether to do one thing or another by what we value to be most important to us. This, therefore, leads to us opportunity cost. Usually when one has to make a decision over what to do, buy, or build, it is narrowed down to two things. We might choose what satisfies our desires, what is more economical, or what is needed more. The choice that we do not take is our opportunity cost, the choice that we value†¦show more content†¦As shown on the diagram below if the government only builds schools then they are at point A, which means they are not building libraries, therefore not allocating resources. If they concentrate only on building libraries, and not schools, then they are at po int E. In order to build both they would need to place themselves at points B, C, and D. At point B there is a bigger production of schools and a small production of libraries. At point D, there is a larger production of libraries and a smaller production of schools. The most effective point would be C because they would concentrate all their efforts on both schools and libraries and therefore have the best allocation of resources and have no opportunity cost. All these factors combined are essential to making better economical decisions for any society. The production possibility curve helps deicide more efficient ways to distribute resources. Businesses and government have to find all the different possibilities, study them, and make the best decision on what is best to produce and what would bring in more profit. Opportunity cost can also help us understand what products a consumer might choose to buy and the best price for the product. This can also help companies decide on bett er ways to proceed with sales. The free market is a well-advanced state of economy in a society. Through this marketShow MoreRelatedChallenges Faced By International Businesses Essay1506 Words   |  7 PagesInternational Businesses to seek for opportunity and chance to expand their business to a wider marketplace. There are many ways for international businesses to seek those opportunities, such as through exporting goods and services, starting a joint venture with a company, opening a branch for distributing goods, and giving license to produce goods. 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