OPPORTUNITY COST AND FREE MARKET scarcity is one of the fundamental and crucial points to understand in microeconomics.1 Scarcity means that we cannot satisfy all the needs and wants to satisfy our desires. Scarcity can be applied to almost anything. Due to the scarcity of products we have to make a choice about what we want. We have to choose whether to do one thing or another based on what we believe is most important to us. This, therefore, entails an opportunity cost. Usually, when you have to make a decision about what to do, buy or build, it comes down to two things. We could choose what satisfies our desires, what is cheapest, or what is most necessary. The choice we don't make represents our opportunity cost, the choice we value less. Scarcity, choice, and opportunity cost are all related and intertwined. If resources were unlimited we would never have to choose what is most important to have because we would have everything. A good example of applying scarcity would be time. Have you ever had to decide whether to stay home and study or go out and party? By choosing to go out and party we take time away from studying. This is a choice we must make, and whatever we choose not to do represents our opportunity cost. Because resources in our economy are limited, we must decide what is most important and where to spend our money and time. A production possibilities curve shows us the opportunity cost and how to get the best possible combination of our two choices. The production possibilities curve could help us better understand how to bring things into balance and therefore not have to sacrifice a choice but combine them. The production possibilities curve is illustrated in a diagram; through the diagram we... middle of paper... mixed economy individuals can obtain better education, better distribution of wealth, and thrive in small businesses without fear that monopolies will overwhelm them. This is not only beneficial for the population, but also for the country. This type of economy leads to fairly stable countries that are dominant in many markets and have the ability to thrive in new, advanced technological fields. While no system is perfect, and you will find those who disagree with it, it has proven to be a good combination of freedom and restriction as it works in many countries such as the United States and Great Britain. Bibliography • Maunder, P; Myers, D; Wall, N; and LeRoy Miller, R. The Economy Explained. Collins educational. Second edition. Copyright 1987.• Samuelson, P and Nordhaus, W. Microeconomics. McGraw-Hill Irwin. Seventeenth edition. Copyright 2001.