Click to review the online content. Then answer the question(s) below, using complete sentences. Scroll down to view additional
questions.
Introduction to Economics – Scarcity
Many economists would say that scarcity is the most important economic concept. The idea of scarcity in economics refers to the limits that everyone must face when making choices. All people have wants or needs that are much greater than what they have and, more importantly, what is available. In fact, you are probably practicing the idea of scarcity right now. You might be thinking of five things that you need or want to do right now instead of reading this passage. People want more than what is available. This includes time.
Choice vs. Cost
Scarcity exists because most things in life are not free. People must make a choice between buying one thing, such as a laptop, and not buying another thing, such as new shoes. What they choose to buy creates scarcity because they cannot buy everything they want. In fact, economists believe that everything that people want, are trying to get, or cannot get is scarce.
When someone does purchase that laptop, the new pair of sneakers is the cost. A cost is what someone gives up to pay for (or get or do) something else. Most people decide on their choice versus their cost by seeing which has the greater benefit. Someone might decide that he can use his laptop for school work, streaming, and video games, while the sneakers will only add to how he looks. So the ultimate cost is style.
Three Questions of Economics
On a bigger scale, every government’s economy must practice the idea of scarcity by making choices and considering costs when answering three questions. How the government answers each question determines what type of economy that society will have.
What Will We Produce?
No government can make anything without resources. Most people think of resources as things like trees or oil. But resources include time, money, and effort as well. Governments must choose how to use those resources to produce what will be most useful to the society that they serve. As with all economic choices, there are costs. It is not possible for any government to provide for everything for their people. There will always be things that will be scarce.
How Will We Produce It?
How to produce something is just as difficult a question to answer as what to produce. Again, time, money, and effort are limited, so a government can only spend so much of each to meet their needs. A government may decide to produce something for less money that takes less time and requires less effort. However, that often leads to issues that cause scarcity in a different way. Perhaps the easier way leads to pollution or fewer available jobs for people. Even something that seems positive creates scarcity elsewhere.
For Whom Will We Produce It?
Governments like to say that all decisions are made for all people, but this is just not possible. When a government decides to make something in a certain way, they are limiting the number of people who will be able to get it. This can cause scarcity for some people because they do not have the money to pay for the product. They may need the money to pay their bills. Or maybe the product is not available in their area, and they do not have the time to travel elsewhere to buy it.
An Abundance of Scarcity
Scarcity is a permanent part of life. It will not go away no matter how much people wish it to. Everyone, every day, will continue to practice this idea because there will always be something that is not available to them. Whether it be money, time, or something else, scarcity is an economic concept that
Why does scarcity require choice? What is the cost of a choice?
Why is scarcity the basis of all economic decisions? Describe how the role of the government in a society influences the three economic questions.
