What is Scarcity?
- Scarcity is a central concept of economics, it refers to the limited availability of economic resources, relative to the unlimited demands of a society.
- Economics can be defined as the study of human behavior as the management of scarce resources.
Scarcity and the Basic Economic Problem
- Human wants are infinite, but resources are scarce.
- It has been theorized that people have a hierarchy of wants, starting off with basic needs such as food and shelter and going up to socialization and creative fulfillment.
- As the wants in the lower levels of the hierarchy are satisfied, people will want things from higher levels of the hierarchy.
- Economies also allow people and countries to specialize into producing specific goods.
Choices
- The Earth has limited resources and thus cannot satisfy everyone's wants.
- This is why we need to make choices when distributing and acquiring resources.
- Every choice we make has an opportunity cost, which is what we have to give up when making a choice.
- Economics studies the consequences of our choices, for the past, present and future.
- Economics guide our decision-making, in order to make the best possible choices (theoretically, at least ;D).