Economics can seem like a fairly complex subject when viewed from a distance. Particularly at the tertiary level of study it may seem overrun with formulas, graphs and strange terms. Even familiar terms can have different meaning from one field to another as with ‘profit’. In accounting this concept means something very different. Similarly, scarcity is a word we may use regularly as lay people that has more depth added to in this subject. This essay delves into the different elements of this fundamental economic problem.
Every good and service that we use on a daily basis is finite. The petroleum that was used to make the plastic for the chairs we sit on will eventually run out and even if we think more short term than that, the time it took to make them is also limited. Services operate in much the same way. If you have a favorite magician there are only so many shows that he or she can do in a fixed period of time. This cannot be changed.
In stark contrast with our finite good and services are our infinite wants. These are not the same as needs. We may think we need a particular brand of coffee or style of clothing but that is in fact a want. The Needs of all the people in the world are immense but they could in theory be counted. Wants are limitless and they can be inflamed by advertising. If a new fashion trend emerges that is radically different from what was used before, an entire new wardrobe may be needed to keep up. The same goes for technology which is designed to become obsolete a few years into its life.
With infinite wants and finite services with which to supply them we are faced choices on a daily basis. Should we enjoy the use of this service or purchase this good? For every choice we make there is an alternative we must give up. Whatever the second best choice is when a decision is made is called out opportunity cost. This is the element of scarcity that most lay people ignore.
As much as we may enjoy feeling like we can have everything we want, our world is simply not designed that way. Through understanding these concepts we can make better choices.
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