Resources are limited, while needs and wants are unlimited. We are therefore faced with the economic problem of scarcity, which forces us as individuals and as a society to continuously make choices about how our scarce resources are to be used to satisfy our needs and wants. In this section, we will argue that whenever a choice is made, it involves a cost that is known as the opportunity cost of the choice. We will also show that because of the existence of opportunity cost, there is no thing such as a ”free lunch”, which basically means that it is impossible to get something for nothing since the cost of something is ultimately borne by someone in a particular society.

Watch the following video clip about the link between scarcity, choice and efficient use of resources.