Common Sense Economics: What Everyone Needs to Know about Wealth and Prosperity
The reality of life on our planet is that productive resources are limited, while the human desire for goods and services is virtually unlimited. Would you like to have some new clothes, a luxury boat, or a vacation in the Swiss Alps? How about more time for leisure, recreation, and travel? Do you dream of driving your brand-new Porsche into the driveway of your oceanfront house? Most of us would like to have all of these things and many others! However, we are constrained by the scarcity of resources, including a limited availability of time.
Because we cannot have as much of everything as we would like, we are forced to choose among alternatives. There is “no free lunch.” Doing one thing makes us sacrifice the opportunity to do something else we value. This is why economists refer to all costs as opportunity costs.
- Is Jerry’s suit free? If not, what are his costs?
- The reason everything has costs is because of scarcity. What are the things (not just monetary) that are scarce in Jerry’s life, which he has to give up for the suit?
- Are the costs the same for everyone? Imagine if you had lots of money (like Jerry Seinfeld the actor), would you accept a “free” suit, if it meant creating an obligation?
- What if you really liked (for some weird reason) Kenny Bania (the guy giving away the suit). Would that change the costs? Could a dinner obligation with him ever be a benefit, rather than a cost? If so, do you think he’d be so eager to give away an expensive suit to get a dinner invitation?
This reading is an excerpt from Certell’s Common Sense Economics eBook. Certell offers curriculum materials and eBooks free of charge for students and teachers. Click Here to download the Common Sense Economics Materials.
Project nerd. Tanstaafl [Photograph]. Retrieved from http://project-nerd.com/wp-content/uploads/2016/03/Tanstaafl.jpg