Question 1. Making decisions under scarcity is a very common problem because we usually have restricted means available

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Question 1 Making Decisions Under Scarcity Is A Very Common Problem Because We Usually Have Restricted Means Available 1 (520.37 KiB) Viewed 56 times

Question 1. Making decisions under scarcity is a very common problem because we usually have restricted means available to achieve our goals. Therefore, we tend to sort these problems into attainable actions taking into consideration which of them will be best achieved given our objectives. Whilst opportunity costs describe the unavoidable trade- offs in the presence of scarcity thus satisfying one objective more means satisfying other objectives less. A typical illustration of a daily routine is how much time to spend working. Thus, when you have to compromise between more free time and more income. Assume Kwame works as a civil servant, a plumber at Ghana Water Company Ltd. And he gets paid Ghs 20.00 an hour for a 40-hour working week. This gives him an earning of Ghs 800.00 per week. A week has 168 hours which means after Kofi's 45 hours of work is over, he has 128 hours of free time left for any other activities he wants which include leisure and sleep. Kwame is approached by his neighbour who offers him a job of working on the water supply system of a newly constructed factory part time after he closes from work. He offers him a new wage of Ghs 60 and lets him decide how many hours he works each week. Here, Kwame has a choice to make, will carry on working 40 hours per week. If he carries on working 40 hours per week, his weekly wages will be three times higher than his usual wages thus giving him Ghs 2400.00. Kwame can also decide that he is satisfied with his usual wages of Ghs 800.00. He can now earn cutting his weekly hours and enjoy more free time than before or he can use the opportunity granted by his neighbour to increase both his weekly earnings and his free time some intermediate mount.