between the different uses to which they may be put. ... Everywhere we turn, if we choose one thing we

must relinquish others which, in different circumstances, we would wish not to have relinquished.

Scarcity of means to satisfy given ends is an almost ubiquitous condition of human nature.

Because people live in a world of scarcity, they cannot have all the time, money, possessions, and experiences

they wish. Neither can society.

This chapter will continue our discussion of scarcity and the economic way of thinking by first introducing

three critical concepts: opportunity cost, marginal decision making, and diminishing returns. Later, it will

consider whether the economic way of thinking accurately describes either how we makechoices and how we

shouldmake them.

2.1 How Individuals Make Choices Based on Their Budget Constraint

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Calculate and graph budget constraints
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