12.1+Basic+Economic+Concepts

Basic economic concepts


 * [|Relative scarcity]** occurs because (most) resources are generally seen as finite whereas needs and wants are assumed to be relatively infinite. Both rich and poor individuals and countries face scarcity. Economies set about solving the problem of scarcity (and are unlikely to ever succeed).

Economists use the term **[|opportunity cost]** to describe the value of the next best alternative that is foregone whenever a choice is made. The best thing that you choose not to do is sometimes referred to as the economic cost.

Economics is essentially about incentives and the study of how humans behave in response to those incentives. The results are not always as predictable as you think. Here are a couple of examples to start your thinking about these important ideas:

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