1.1.2—The problem of choice

Choice exists because wants are unlimited while resources such as time, income, labour and natural inputs are scarce. Choosing one option means giving up the next-best alternative.

Opportunity cost links scarcity to decisions: the cost is the value of the best forgone option, not every possible alternative.

Name the constrained resource, the chosen option and the best forgone alternative.

Using an evening to study economics means giving up the best alternative, such as paid work or rest, not every activity you could have done.

A financial price is not always the opportunity cost; time and non-market effects can matter.

Factors of production are land (natural resources), labour (human effort), capital (produced means of production) and entrepreneurship (organising resources and bearing risk). Scarcity creates a sustainability challenge when present choices deplete finite resources. A genuinely abundant free good has no opportunity cost at the point of use; most goods are economic goods because using resources for them forgoes another use.