Define the terms opportunity cost, scarcity, and resources

Opportunity Cost - This concept refers to the forgone benefits that an individual or organization sacrifices when choosing another alternative. This concept is a basic element used in trade theory; however, it can also be used in individuals' daily lives.

An example of this occurs when we have free time and we have to decide how to invest our free time. Imagine that we can watch TV or read a book. If we decide to watch TV, the opportunity cost would be the lost benefit derived from reading a book. Therefore, any time we face a situation in which we have more than one alternative, we are going to have an opportunity cost.

Scarcity - This term is used in economics to describe the gap between the limited resources in the world and the unlimited human needs or desires.

For instance, due to the coronavirus crisis, during a time many goods were limited such as surgical face masks or toilet paper. In that situation, consumers wanted to buy many surgical face masks and toilet paper (unlimited wants); however, the supply of these goods was limited due to the high demand which originated a market shortage.

Resources - Resources, also known as inputs, are the materials, money, staff, or other assets that are used to produce an output. In economics, the resources are all the things used to produce a product or service. However, this concept can also be utilized in our daily lives since we always use things to obtain an output such as money.

For example, we use money to purchase vegetables, fruits, meat, bread, and so on. Here, we are using a resource ( money) to purchase more resources that will be used to create a meal which is the final output. Resources can also include our effort (labor) to study, work, or exercise because they will also bring a final output.