Economics: the study of how people choose to use their limited/scarce resources to satisfy their unlimited wantsEconomic choices incur economic costs (called opportunity costs)Opportunity cost: value of the best alternative forgone[NB: note OC is the BEST alternative forgone and NOT ALL alternatives]e.g. Explain which of the following are part of your OC of being a student.

1) the money you spend on haircuts2) the holiday you would have taken if you hadn’t had to revise for supplementary exams3) the CDs you don’t have because you had to buy textbooks4) the amount you spend buying meals in ref5) the salary you could have earned had you chosen a job rather than being a full-time studente.g. Opportunity cost is best defined as :a) the out-of-pocket money costs incurred when a decision is made.

b) the value of the best alternative sacrificed when a choice is made.

c) the value of all the alternatives given up when a choice is made.

d) the value of time lost when a choice is made.

e) both (b) and (c) above.

e.g. Footballer Mark Fish receives a red card, a fine of R5 000 and two-match suspension. Fish gets a match fee of R10 000 per match, appearance money of R20 000 per match from his sponsors. He pays R1 000 per match for insurance. What is his OC for the incident?OC= Out-of-pocket loss + R5 000Match fee loss + R10 000 2 matchesAppearance fee loss + R20 000 2 matchesBUT insurance fee gain R1 000 2 matchesTotal R63 000 Therefore in our world there are three unsolvable problems:1. Scarcity2. Choice3. Opportunity costsWhat are the remaining solvable economic problems:1. Allocation function (WHAT to produce and WHAT quantities? i.e. output)2. Production function (HOW to produce? i.e. input)3. Distribution function (FOR WHOM to produce?)Economics Essays