Caring for newborn babies and trying to save the lives of cancer patients are clearly both desirable objectives. If a society decides that it doesn't have the money to do both, the only way to choose between these objectives is to make value judgements about which of these is the more important objective. Answers to Problems and Questions for Discussion 1. Economics is the study of how to use our limited resources to satisfy our unlimited wants as fully as possible. The three fundamental choices are also referred to as the three fundamental questions of economics.
Economic efficiency means obtaining the most benefit from our scarce resources.
If our economy fails to achieve economic efficiency, we will not satisfy as many of our society's unlimited wants as possible. Thus the society's standard of living will be lower than necessary. The opportunity cost of the free trips is whatever the airline is forced to give up because it has given away these seats. During the Christmas season and other popular times for travel, the opportunity cost of free trips probably increases, since there would generally be fewer vacant seats on all routes. Tradeoffs are situations in which society achieves a particular goal only by sacrificing another goal.