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Humans are filled with ‘needs & wants’ but often lack the resources to obtain all of these desires, which is why they must often preference these wants. Opportunity cost is representing the cost of satisfying a want over an alternative want . There are three main types of human wants, which can also be called Aggregate demands, because of these desire for goods and services to consume is greater than our ability to produce goods and services, the economic problem emerges. This economic problem influences the income levels of individuals throughout the world.
In making economic choices today, we can influence economic outcomes in the future. This is mainly through the production of either consumer goods or capital goods. An economy must forgo the production of either consumer or capital goods in order to satisfy a higher number of wants for tomorrow. This economic decision does indeed have future implications for individuals, firms and governments alike.
Economic choices made by individuals are influenced by numerous factors such as age, income, expectations, future plans and family circumstances and personality traits. However, the choices an individual makes often leads to the ability to achieve the ‘opportunity cost’ or satisfy greater wants later on in life.
For example - a person may discard the choice of a holiday in order to work, and this would give them the opportunity to save so that they would have more money to spend when they went on a holiday after.