Scarcity refers to the limited availability of a commodity, which may be in demand in the market. The concept of scarcity also includes an individual capacity to buy all or some of the commodities as per the available resources with that individual.
Scarcity refers to a gap between limited resources[disambiguation needed] and theoretically limitless wants . The notion of scarcity is that there is never enough (of something) to satisfy all conceivable human wants, even at advanced states of human technology. Scarcity involves making a sacrifice—giving something up, or making a tradeoff—in order to obtain more of the scarce resource that is wanted.
The condition of scarcity in the real world necessitates competition for scarce resources, and competition occurs "when people strive to meet the criteria that are being used to determine who gets what.":p. 105 The price system, or market prices, are one way to allocate scarce resources. "If a society coordinates economic plans on the basis of willingness to pay money, members of that society will [strive to compete] to make money":p. 105 If other criteria are used, we would expect to see competition in terms of those other criteria.
For example, although air is more important to us than gold, it is less scarce simply because the production cost of air is zero. Gold on the other hand has a high production cost. It has to be found and processed, both of which require a great deal of resources. Additionally, scarcity implies that not all of society's goals can be pursued at the same time; trade-offs are made of one goal against others. In an influential 1932 essay, Lionel Robbinsdefined economics as "the science which studies human behavior as a relationship between ends and scarce means which have alternative uses." In cases of monopoly or monopsony an artificial scarcity can be created. Scarcity can also occur through stockpiling, either as an attempt to corner the market or for other reasons. Temporary scarcity can be caused by (and cause) panic buying.
A scarce good is a good that has more demand than supply. This, according to economic laws, would have by nature an attributed price. The term scarcity refers to the possible existence of conflict over the possession of a finite good. One can say that, for any scarce good, someones’ ownership and control excludes someone else’s control.Scarcity falls into three distinctive categories: demand-induced, supply-induced, and structural . Demand-induced scarcity happens when the population or demand for the resource increases and the supply stays the same . Supply-induced scarcity happens when a supply is very low in comparison to the demand . This happens mostly due to environmental degradation like deforestation and drought. Lastly, structural scarcity occurs when part of a population doesn't have equal access to resources due to political conflicts or location . This happens in Africa where desert countries don't have access to water. To get water they have to travel and make agreements with countries who have water resources. In some countries political groups hold necessary resources hostage for concessions or money . Supply-induced and structural scarcity demands for resources cause the most conflict for a country.
On the opposite side of the coin there are the nonscarce goods. These goods don’t need to be valueless and some can even be indispensable for one’s existence. As Frank Fetter explains in his Economic Principles: “Some things, even such as are indispensable to existence, may yet, because of their abundance, fail to be objects of desire and of choice. Such things are called free goods. They have no value in the sense in which the economist uses that term. Free goods are things which exist in superfluity; that is, in quantities sufficient not only to gratify but also to satisfy all the desires which may depend on them.” As compared with the scarce goods, nonscarce goods are the ones where there can be no contest over its ownership. The fact that someone is using something doesn’t unable anyone else to use it. For a good to be considered nonscarce it can either have an infinite existence, no sense of possession or it can be infinitely replicated. However, a different stream of thinking with regard to scarcity states that there is no good that is truly non-scarce. Although some goods and materials appear completely abundant, ensuring quality standards of these goods creates costs to society. A prominent example can be the costs to reduce air pollution. Stating that non-scarce goods don't exist also follows the maxim "there's no such thing as a free lunch", one of the core theories in capitalisteconomic theory.
|Look up scarcity in Wiktionary, the free dictionary.|
- Milgate, Murray (March 2008). "goods and commodities". In Steven N. Durlauf; Lawrence E. Blume. The New Palgrave Dictionary of Economics (2nd ed.). Palgrave Macmillan. pp. 546–48. doi:10.1057/9780230226203.0657. Retrieved 2010-03-24.
- Montani, Guido (1987). "Scarcity". In Eatwell, J.; Millgate, M.; Newman, P. The New Palgrave. A Dictionary of Economics. 4. Palgrave, Houndsmill. pp. 253–54.
- Malthus, Thomas R. (1960) . Gertrude Himmelfarb, ed. On Population (An Essay on the Principle of Population, as It affects the Future Improvement of Society. With Remarks on the speculations of Mr. Godwin, M. Condorcet, and other writers). New York: Modern Library. p. 601. Retrieved 2010-03-24.
- Burke, Edmund (1990) . E. J. Payne, ed. Thoughts and Details on Scarcity. Indianapolis, IN: Liberty Fund, Inc. Retrieved 2010-03-24.
- ^Siddiqui, A.S. (2011). Comprehensive Economics XII. Laxmi Publications Pvt Limited. ISBN 978-81-318-0368-4. Retrieved 2017-11-20.
- ^"Scarcity". Investopedia. Retrieved 2017-11-20.
- ^ abcd:pp.5–8Heyne, Paul; Boettke, Peter J.; Prychitko, David L. (2014). The Economic Way of Thinking (13th ed.). Pearson. ISBN 978-0-13-299129-2.
- ^Robbins, Lionel (2014) . An Essay on the Nature and Significance of Economic Science (2nd ed.). London: Macmillan. p. 16.
- ^ abA. Tucker, Jeffrey; Kinsella, Stephan. "Goods, scarce and nonscarce". Mises. Retrieved 25 Aug 2010.
- ^ abcdefKennedy, Bingham (January 2001). "Environmental Scarcity and the Outbreak of Conflict". PRB.
Economics, Scarcity, and Choice
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Economics, Scarcity, and Choice
Economics: is the study of choice under conditions of scarcity
Scarcity: a situation in which the amount of something available is insufficient to satisfy the desire for it.
- time and purchasing power are scarce
As individual’s, we face a scarcity of time and spending power. Given more of either, we could have more of the goods and services that we desire.
Resources: the land, labor, and capital that are used to produce goods and services
- scarce labor
– the time human beings spend producing goods and services capital
– long lasting tools used in producing goods and services physical capital: buildings, machinery, equipment human capital: skills and training workers possess land
– the physical space on which production occurs, and the natural resources that
come with it
As a society, our resources, land, labor, and capital, are insufficient to produce all the goods and services we might desire. In other words, society faces a scarcity of resources.
Raw material – not long lasting tool Ex. Chalk
What to produce?
How much to produce?
How to produce it?
The World of Economics
Microeconomics: the study of the behavior of individual households, firms, and governments; the Choices they make; and their interaction in specific markets What happens to the cost of movie tickets over the next five years? How many jobs will open up in the fast-food industry?
Macroeconomics: the study of the economy as a whole Lumps all goods and services together and looks at the economy’s total output.
Positive economics: the study of what is, of how the economy works (deals with the facts)
Ex. If we lower income tax rates in the U.S. next year, will the economy grow faster? If so, by how much? What effect will it have on total employment?
Normative economics: the study of what should be; it is used to make value judgments, identify Problems, and prescribe solutions. Normative analysis is based on positive analysis.
Why Study Economics
1. To understand the world better
- understand global and cataclysmic events such as wars, famines, epidemics
- understand local problems; ex. Worsening traffic conditions in the city
- tell us how many skilled therapists, ministers are available to help us
2. To gain self-confidence
- when you master economics, you gain a sense of mastery over the world,
and thus over your own life
3. To achieve social change
- make the world a better place
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Economics Human Capital Natural Resources Goods Food Industry Judgments Microeconomics Households Looks Deals
- help understand stand the origins of problems
4. To help prepare for other careers
- doctors need to understand how newer technology or changes in the structure if HMO’s will affect their practices
5. To become an economist
The Methods of Economics
Model: an abstract representation of reality
A model should as simple as possible and still accomplish its purpose
Simplifying assumption: any assumption that makes a model simpler without affecting any of its.
Ex. Assume that there are only two goods, two nations
Critical assumption: any assumption that affects the conclusions of a model in an important way.
Ex. We assume that firms will try to earn the highest possible profit