Families must decide whether to spend their money on a new car or a fancy vacation. Towns must choose whether to put more of the budget into police and fire protection or into the school system. Nations must decide whether to devote more funds to national defense or to protecting the environment. Economics helps us understand the decisions that individuals, families, businesses, or societies make, given the fact that there are never enough resources to address all needs and desires.
Most goods and services are economic goods , i. Scarce goods are those for which the demand would be greater than the supply if their price were zero. Because of this shortage, economic goods have a positive price in the market.
That is, consumers have to pay to get them. What is an example of a good which is not scarce? Water in the ocean? Sand in the desert? Any good whose supply is greater than the demand if their price were zero is called a free good , since consumers can obtain all they want at no charge.
We used to consider air a free good, but increasingly clean air is scarce. There are four productive resources resources have to be able to produce something , also called factors of production :. What a waste of labor resources. In the US we find one, or two, workers at a checkout stand and only a few will be open.
In Moscow ALL stands were open with four employees each. This is productively inefficient. Their costs are higher and since labor is being wasted, they will produce less. They are not achieving the maximum satisfaction possible from their limited resources productive inefficiency. Take a brief look at one or a few of the following news articles. When you click on the link they should appear in a new browser window. If each company was able to continue producing the same amount of output after laying off thousands of workers then they must have been productively inefficient before the layoffs.
I realize that this may be a bit controversial. If you have questions let's discuss them on our discussion forum. When you click on the link it should appear in a new browser window. Keep in mind the GOAL: reducing scarcity and achieving the maximum satisfaction possible from our limited resources. If these companies can still produce the same amount of output with thousands fewer employees, by laying them off they become available to work somewhere else producing MORE for society.
BUT, will they find another job? These articles indicate that in today's economy they probably will:. Would it be better for society to have them stay at companies where they are not needed or to be unemployed collecting unemployment compensation or welfare? I would consider the possibility that it would it be BETTER for society to have them be unemployed collecting unemployment compensation or welfare. Not all layoffs are good for society. See: lay-offs. If businesses use resources where they are best suited then MORE can be produced from the same amount of resources.
Let's say I own a company which employs secretaries and truck drivers. Normally the secretaries type letters and the truck drivers drive trucks. One day I decide to try something new. I had the secretaries drive the trucks and the truck drivers type letters. Hopefully you were thinking "they went up.
Therefore, to be productively efficient and achieve the maximum satisfaction possible from our existing resources we must use resources where they are best suited. Doctors should work in the hospitals and engineers should build the bridges. This would be productively efficient. More bridges will be built and more lives saved. It would be productively inefficient i. Fewer bridges would be built and fewer lives saved.
This would be productively inefficient - a waste of existing resources. Illinois has resources weather, machinery, soil, etc.
So it makes sense for Illinois to grow corn and for Alabama to grow cotton since this way we get more corn and more cotton from the same amount of resources. This is productively efficient.
But there is just one problem. In Illinois we have a lot to eat corn but no clothes cotton. And in Alabama they have cotton clothing, but they are staving. So what do we do?
We exchange or trade. We in Illinois sell corn to those in Alabama and they sell cotton to us. If we didn't trade then we would have to grow both corn and cotton and Alabama would have do the same. North Dakota has resources suited to growing potatoes cold climate, good soil, etc.
Honduras, in Central America, has resources suited to growing sugar, or sugar cane hot wet climate, poorer soils, etc. So it is productively efficient to grow potatoes in North Dakota and to grow sugar in Honduras. Costs are lower, and more importantly, more can be grown with the existing resources. Why, then, do they grow sugar sugar beets in North Dakota? The sugar that we get from sugar beets is very expensive. Why do we grow sugar beets in North Dakota when we can get cheap, high quality, sugar from Honduras?
The answer has to do with trade. There is free trade between Illinois and Alabama. Free trade means that the government does not try to restrict trade with taxes or other barriers. Therefore, Alabama and Illinois can use their resources where they are best suited and achieve productive efficiency, i. But there are trade restrictions on sugar between the US and Honduras. This, then, encourages the farmers to be productively inefficient. Free trade, then, is a necessary condition to achieve productive efficiency since it allows resources to be used where they are best suited - regardless of the state, or the country.
Economists have a slightly different view of discrimination. They would ask, "How does discrimination affect the quantity of boats and everything else that are produced with the resources available? By using the technology that minimizes costs, it minimizes the amount of resources used, since it is the resources that make up the costs of production.
For example, in the US farmers use tractors to plow their fields, whereas in the country of Kenya in East Africa most field are plowed by hand. It could be argued that both farmers ARE being productively efficient.
In Kenya, tractors, fuel, repairs, etc. Why don't US farmers use "modern" technology and plow their fields with helicopters and laser beams sort of like the Jetsons? The answer is easy, it would be too costly.
There are cheaper, and more productively efficient, ways to get the job done. The second way to use our existing resources to maximize society's satisfaction is allocative efficiency. It would be a waste of our limited resources to produce a lot of things that we don't want and few of the things that we do want. In this article, we discuss what scarcity is and why it is so important, with answers to frequently asked questions.
Scarcity refers to the limited availability of resources that are typically available for use. Also known as paucity, it is opposed to the theoretically infinite demand for resources that we have as a society. In economics, scarcity refers to the gap between insufficient resources and the theoretical needs people have for these resources. In situations characterized by scarcity, societies have to decide how to allocate scarce resources efficiently, to address the needs and wants of the majority population.
In general, all resources that entail some cost during consumption can be considered scarce. In reality, however, what really has the most effect on society is relative scarcity. Related: 18 Top Economics Degree Jobs. Scarce goods are those that are associated with a virtually limitless demand. These can range from limited, valuable resources such as petroleum oil to T-shirts that go on a limited release from a designer clothing company. When a large number of people line up to purchase those shirts over the supply, the shirts effectively become scarce goods.
In contrast, goods that are readily available at little to no cost are known as non-scarce or free goods. Scarcity is one of the most significant factors that influence supply and demand. The scarcity of goods plays a significant role in affecting competition in any price-based market.
Because scarce goods are typically subject to greater demand, they often command higher prices as well. This is part of the reason why high-end cellphones and designer clothing are more expensive than their more abundant counterparts. Problems arise when resources that are essential to the function of society become scarcer over time.
Scarcity affects more than just products or natural resources. Everything usable can be considered resources. Common examples are oil, coal and precious metals. When these materials become scarce, the ability of businesses to meet production goals can be affected adversely. Therefore, scarcity can limit the choices available to the consumers who ultimately make up the economy. Scarcity is important for understanding how goods and services are valued. Things that are scarce, like gold, diamonds, or certain kinds of knowledge, are more valuable for being scarce because sellers of these goods and services can set higher prices.
These sellers know that because more people want their good or service than there are goods and services available, they can find buyers at a higher cost. Scarcity of goods and services is an important variable for economic models because it can affect the decisions made by consumers. For some people, the scarcity of a good or service means they cannot afford it.
The economy of any place is made up of these choices by individuals and companies about what they can produce and afford. The goods and services of any country are limited, which can lead to scarcity. Countries have different resources available to produce goods and services. These resources can be workers, government and private company investment, or raw materials like trees or coal. Certain limits of scarcity can be balanced by taking resources from one area and using them somewhere else.
Sellers like private companies or governments decide how the available resources are spread out. This is done by trying to strike a balance between what consumers need or want, what the government needs, and what will be an efficient use of resources to maximize profits. Countries also import resources from other countries, and export resources from their own.
0コメント