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GETTING DOWN TO Business: Scarcity and opportunity costs

Explore the concepts of scarcity and opportunity costs and their impact on decision-making. Learn about rationing devices, competition, and how trade-offs influence behavior. Discover how scarcity affects individuals, organizations, and governments.

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GETTING DOWN TO Business: Scarcity and opportunity costs

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  1. GETTING DOWN TO Business: Scarcity and opportunity costs

  2. Questions: • Does Bill Gates have to deal with scarcity? • What about the United States Government? • Is it possible to eliminate people’s wants?

  3. The Two Paths of Scarcity… • Because we know scarcity exists, there arises two distinct consequences: • 1.) The need for a rationing device • 2.) Competition

  4. What is a rationing device? • A rationing device is a way to decide who gets what amount of available goods or resources (add to your definitions list). • Obvious Example: MONEY!!! • However, if money didn’t exist, do you think people would develop an alternative rationing device?

  5. Competition • We live in a competitive world: • Grades, sports, attention, more friends, nicest car…etc. • What is one thing you are competitive about? • Draw a flow chart showing the two paths of scarcity.

  6. Opportunity Costs • Add this to your list of definitions: • Opportunity Costs: the most valuable thing you give up when you make a choice (the next best thing). • It can only be 1 thing!!! • Trade-offs are basically the same as opportunity costs (when I choose one thing over the other, I am giving something up)

  7. Opportunity Costs Continued • Opportunity Costs change the way people behave. • Example: Ice Cream and cookies • Everyone knows that I love cookies. If my only dessert option was ice cream, most likely I would choose that, or lose out on dessert all together. However, given the choice, I would choose cookies over ice cream every time. The opportunity cost of choosing ice cream is loosing out on cookies.

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