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This is Scarcity, choice and opportunity cost.

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This walkthrough uses a generic synthetic narrator, not a
recording of Craig Wright.

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Pause whenever you need time to calculate.

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The original lesson, written walkthrough and exercises
accompany this video.

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Choices begin with scarcity.

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Imagine a completely free afternoon.

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Even without a cash expense, you cannot spend the same hour
sleeping, visiting a friend and learning a skill

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in different places.

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Time is scarce because its uses compete.

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Wealth can relax some constraints, but it does not remove all
of them.

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Economics begins by identifying the decision-maker, the
available alternatives and the limits on those

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alternatives.

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This course pays particular attention to individual agency and
voluntary arrangements.

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That interest does not settle every factual question: we must
still examine evidence, assumptions and the

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consequences of different choices.

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A feasible choice is an available choice.

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Suppose a learner wants to take three evening classes.

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Enough money is not sufficient if all three meet at the same
time.

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Equally, an available timetable is not enough if a required
prerequisite is missing.

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Write down each relevant constraint before recommending a
choice.

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A constraint is binding at a particular choice when that choice
uses the entire stated limit; a non-binding

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constraint has slack.

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Some models simplify this to money alone.

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That can be useful, provided we remember that the model
deliberately leaves out other limits rather than

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proving that they do not exist.

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Worked example: draw a budget boundary.

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Step one is to name the quantities and their units: books and
lunches per week.

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Step two is to multiply each quantity by its price.

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Two books cost 2 times 9 pounds, or 18 pounds; three lunches
cost 3 times 6 pounds, also 18 pounds.

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Step three adds those expenditures: 36 pounds, so that bundle
is feasible and lies on the budget boundary.

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One book and three lunches cost 27 pounds, leaving 9 pounds
unspent.

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Four books and one lunch cost 42 pounds, so that bundle is
infeasible under the stated budget.

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We are holding prices fixed and allowing no borrowing.

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Worked example: calculate the trade-off.

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Divide the book price by the lunch price: 9 divided by 6 equals
1.5 lunches per book.

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Check the units: pounds per book divided by pounds per lunch
becomes lunches per book.

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Because half a lunch may not be purchasable, compare whole
bundles as well.

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Starting from two books and three lunches, moving to four books
and zero lunches gains two books and

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sacrifices three lunches.

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The ratio is still three divided by two.

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Whether that change is desirable depends on the learner's
priorities.

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Feasibility and desirability are separate questions.

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Opportunity cost is the best forgone alternative.

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List the alternatives before calculating anything.

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Tutoring and gardening cannot both occupy the same hour, so
adding their earnings invents an opportunity

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that never existed.

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Non-cash alternatives also count.

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Someone might value resting above either paid activity.

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We cannot discover that ranking from wages alone.

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When we express benefits in pounds, we are using a stated or
estimated money equivalent for this particular

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person, not claiming that every experience has a publicly
observable price.

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Opportunity costs may differ between people facing the same
shop prices because their alternatives and

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priorities differ.

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Keep cash and economic cost separate.

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Suppose making a shelf costs 14 pounds for materials and takes
an afternoon that could otherwise earn 40

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pounds after relevant work expenses.

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Under these illustrative assumptions, the economic cost is 54
pounds.

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Calling the labour unpaid does not make its opportunity cost
zero.

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However, if you compare the project's net outcome directly with
the 40 pounds work alternative, do not

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subtract 40 pounds again on the other side.

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Consistent comparisons can use total outcomes or incremental
differences.

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Both methods should give the same ranking when they include the
same alternatives and avoid counting a

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sacrifice twice.

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Sunk costs belong to the past.

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The practical test is not simply whether money has already
changed hands.

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Ask whether choosing differently now would recover any of it.

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A non-refundable ticket has a sunk purchase price.

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A ticket that can be resold has a current opportunity cost:
using it sacrifices its net resale value.

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An unpaid cancellation charge may also be an avoidable future
cost.

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Decisions should reflect those differences.

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Ignoring a genuinely sunk cost does not excuse the original
decision or prevent learning from it; it means

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refusing to let an irreversible past loss distort the present
comparison.

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Worked example: continue or leave?.

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Step one removes the 18 pounds ticket payment from both current
alternatives because neither decision can

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recover it.

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Step two calculates attending's future net value: 25 pounds
minus 8 pounds equals 17 pounds.

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Step three compares that with the 14 pounds home alternative.

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The difference is 3 pounds in favour of attending, given these
stated valuations.

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If illness reduced concert enjoyment to 19 pounds, attending
would instead give 11 pounds and staying home

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would be preferable.

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The ticket price remains unchanged in both cases.

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The example demonstrates a decision rule; it does not prescribe
how much anyone should enjoy music or rest.

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Think at the margin.

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A first glass of water may be extremely valuable, while a tenth
glass in the same sitting may not be

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welcome.

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Total benefit and the benefit of the next glass answer
different questions.

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Marginal reasoning focuses on the choice that remains open now.

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It is especially useful when deciding how much of an activity
to do.

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The simple rule needs care when choices come in bundles,
require a minimum scale, or affect future

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opportunities.

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In those cases, compare complete feasible plans rather than
mechanically applying a one-unit rule that

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ignores connections between decisions.

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Worked example: choose the next session.

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First calculate each extra session separately: 31 minus 15 is
16; 22 minus 15 is 7; 12 minus 15 is negative

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3; and 5 minus 15 is negative 10.

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Then build feasible totals.

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Zero sessions gives zero; one gives 16; two give 23; three give
20; and four give 10.

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Two sessions is best among these options.

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This conclusion assumes sessions are taken in order, the stated
benefits include relevant consequences, and

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no separate package discount applies.

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An earlier non-refundable enrolment fee would not change this
current choice if it cannot be recovered.

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Rules need their assumptions.

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Imagine that completing all four sessions produces a
certificate worth an additional 30 pounds to the

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learner.

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That changes the fourth session's consequences and therefore
changes the original calculation.

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The earlier conclusion was not mathematically wrong; its
assumptions no longer describe the choice.

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This is why good economic reasoning records the conditions
behind a result.

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A model can make a complex question manageable, but simplicity
is a tool rather than proof of universal

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validity.

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Ask which omitted feature could reverse the ranking, then
investigate that feature instead of adding detail

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that cannot affect the decision.

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Uncertainty changes what we compare.

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Suppose an activity has a one-half chance of delivering a
benefit valued at 40 pounds and a one-half chance

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of delivering zero.

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Its expected benefit is 20 pounds, calculated as one-half times
40 plus one-half times zero.

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That does not mean everyone would exchange a certain 20 pounds
for this gamble.

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Preferences over risk and the ability to absorb a bad outcome
matter.

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Estimates of probabilities can also be poor.

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Treat expected value as one transparent component of a
decision, state where the probabilities came from,

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and avoid presenting an uncertain forecast as a guaranteed
outcome.

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Analysis and values answer different questions.

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A libertarian approach typically gives substantial weight to
individual liberty, property rights and

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voluntary cooperation.

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We can examine that position openly while distinguishing it
from a prediction.

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For example, saying that adults should generally direct their
own lives is a value judgement.

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Saying that a new restriction raises a particular cost is a
causal claim requiring a mechanism and evidence.

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A person's choice reveals something about their ranking among
perceived options, but it does not establish

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perfect information, freedom from pressure, or effects on other
people.

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Keep those questions visible rather than assuming them away.

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A reusable decision checklist.

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Use the checklist on a modest decision before applying it to a
complicated policy debate.

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A clear comparison of two available study plans can teach more
than a confident claim about an entire

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economy with no stated assumptions.

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Notice where arithmetic ends and judgement begins.

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The calculations organise implications of the information
supplied; they cannot create missing preferences

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or reliable probabilities.

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In the exercises, numerical and choice responses can be checked
automatically.

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Short written explanations are explicitly ungraded reflection.

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Use them to state an assumption or limitation, not to guess a
hidden keyword that supposedly proves

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understanding.