Scarce Resource and Opportunity Cost Quick Check
As a result of limited resources such as land and labor, governments in a market economy must make trade-offs in
O the prices of goods and services
which products and services are made available to consumers
which businesses to dedicate labor to
policy decisions and allocation of resources

In a market economy, scarce resources compel governments to make tough choices about how to allocate what they have. For instance, investing in healthcare may mean less funding for education. These trade-offs represent opportunity costs: what you give up when you choose one option over another. So, if a government decides to build a new road, the opportunity cost might be the schools or hospitals that will not receive that funding.

When thinking about real-world applications, consider how cities decide to spend their budgets. If a city allocates more funds to public transportation, it might neglect road maintenance. This decision has economic implications, as effective public transit can boost local businesses and reduce traffic congestion, demonstrating the ripple effect of resource allocation choices on everyday life and economic health.