Scarcity is the fundamental economic problem of having seemingly unlimited human wants in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs. A common misconception n scarcity is that an item has to be important for it to be scarce.
However, this is not true, for something to be scarce, it has to be hard to obtain, hard to create, or both. Simply put, the production cost of something determines if it is scarce or not. For example, although air is more important to us than diamonds, it is cheaper simply because the production cost of air is zero. Diamonds on the other hand have a high production cost. They have to be found and processed, both which require a lot of money. Additionally, scarcity implies that not all of society’s goals can be pursued at he same time;trade-offs are made of one good against others.
The basic economic problem that arises because people have unlimited wants but resources are limited. Because of scarcity, various economic decisions must be made to allocate resources efficiently. When we talk of scarcity within an economic context, it refers to limited resources, not a lack
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Scarcity means that people want more than is available. Scarcity limits us both as individuals and as a society. As individuals, limited income (and time and ability) keep us from doing and having all that we might like. As a society, limited resources (such as manpower, machinery, and natural resources) fix a maximum on the amount of goods and services that can be produced Scarcity requires choice. People must choose which of their desires they will satisfy and which they will leave unsatisfied. When we, either as individuals or as a society, choose more of something, scarcity forces us to take less of something else.
Economics is sometimes called the study of scarcity because economic activity would not exist if scarcity did not force people to make choices. By Marylyn-Ancient option or options that a person gives up. For example, if you gave up the option of playing a computer game to read this text, the cost of reading this text is the enjoyment you would have received playing the game. Most of economics is based on the simple idea that people make choices by comparing the benefits of option A with he benefits of option B (and all other options that are available) and choosing the one with the highest benefit.
Alternatively, one can view the cost of choosing option A as the sacrifice involved in rejecting option B, and then say that one chooses option A when the benefits of A outweigh the costs of choosing A (which are the benefits one loses when one rejects option B). The widespread use of definitions emphasizing choice and scarcity shows that economists believe that these definitions focus on a central and basic part of the subject. This emphasis on choice represents a relatively recent insight into what economics is all about; the notion of choice is not stressed in older definitions of economics.
Sometimes, this insight yields rather clever definitions, as in James Buchanan observation that an economist is one who disagrees with the statement that whatever is worth doing is worth doing well. What Buchanan is noting is that time is scarce because it is limited and there are many things one can do with one’s time. If one wants to do all things well, one must devote considerable time to each, and thus must sacrifice other things one could do. Sometimes, it is wise to choose to o some things poorly so that one has more time for other things.
What goods to produce The first fundamental question is: what goods will be produced? In economics, it is understood that goods and services do not Just exist, they are produced by humans. The decision to produce a certain product has to be conscious and deliberate. Usually, the answer to this question means a lot for a person’s view of economics. In modern economics, we produce anything that people are willing to buy. In this sense therefore production is done to meet market needs.
How to produce the goods and services The second question is how can we produce the said goods and services? To answer this question appropriately one has to think like an economist. To an economist, logic demands that you produce goods and services using the most cost-effective method. However, one cannot ignore other factors such as the quality of production which has to be kept in mind too. Who gets the goods and serviceberry whom to produce? As for who gets the goods and services that are produced, the answer is anyone who is able and willing to buy the goods and services.
According to the classical theory of economics a man can do something for their own self interest and this will be helpful to everyone else. In a typical market, someone sells goods and services in order to get profits. This is self interest. But by selling these goods and services, they are able to services for their own benefit, but in the process, they will be able to help the producer by boosting their business. How will changes be effected and accommodated? This question is about changes and progress in an economy. How are they going to be effected and by who?
In a typical modern economy, changes are effected by individuals who do so for their own good. For example, a manufacturer will improve the quality of their product, not because it is the right thing to do, but because if they do so, then they are likely to attract more customers. Changes are therefore effected by self interested players in an economy, and they are accommodated by self interested players too. If a one person improves on their product, then competitors will also have to improve theirs too or risk being slowly pushed from the market.