Learning about the economy can help us build a model of what it might look like. Figure 1.1 in our text illistrates the circular flow of our economy. In our economy, there are two sectors: the business and household sector. Even though this is our economy flow, our economy is more complex. Our next figures which are Figure 1.2, Figure 1.3 and Figure 1.4 in the text. These figures represent production possibility curves. In figure 1.3, we have identified the law of increasing costs. This means that when the production of a single item increases. the per unit cost of producing additional units will rise as well.
Some choices in life that are made are based on scarcity. Let's say we are grocery shopping in the winter, I do this on a weekly basis. We come across the produce section. We see some fresh cherries for about $4.50/lb. Of course this is far more pricey than usually because right now, cherries go for $1.99/lb. Demand could be higher for cherries in Winter because we don't usually get them. If we wanted to wait till summer time for cherries, it would cost us less and we could save money. If we were to buy cherries in Winter, we would be paying a higher price. We have the choice to purchase this in Winter and Summer. The choice is also to save or spend money.
When I went back to school, the one opportunity cost I gave up was being able to go out as often. To do good in school, I gave up hanging out with friends a lot, going to the movies and going out late. I think that this opportunity cost was a good one because it helped me stay in line in school.
