Scarcity occurs when resources are limited relative to wants, and opportunity cost is the value of the next-best alternative forgone. Which Australian example best illustrates opportunity cost?

• A. Scarcity means resources are unlimited relative to wants.
• B. An Australian family choosing between a new phone and a holiday; the foregone holiday is the opportunity cost.
• C. Opportunity cost is the price paid for a good.
• D. Demand shifts when income changes.

Answer: (B)