What determines whether or not a resource is scarce? Why is the concept of scarcity important to the definition of economics?
IMPORTANCE OF SCARCITY IN ECONOMICS
Economics entails the myriad processes that are involved in satisfying unlimited human needs with scarce resources. Additionally economics entails the examination of various choices made by people and the results that accompany such social and personal choices (Baumol, 2015, p. 39). Therefore many of the choices are made at the family level and then to the nation’s level where decisions are made to acquire certain services or goods for the people. Families make choices that have social and personal significances that may be explained economically. Most of them do not have the same amount of resources and sometimes others have access to more resources than others do. Economics plays an important part in ensuring that the satisfaction of human wants and the limited resources available are brought into the question of whether wants will be satisfied or not. Some of the activities important to economics are production and factors of production.
Scarcity shows that human wants are limitless and cannot be wholly satisfied by the limited resources available (Arnold, 2015, p. 3). The resources available cannot satisfy all human wants that a person needs since they are limited. A resource can be classified as scarce when it is limited in supply. For example, oil is a scarce commodity since its supply is limited and can be found in few countries.
Economics entails the study of choices that people have to make with the scarce resources available. Scarcity creates the need for choices as one chooses whether he will acquire a certain want or the other because of the limited resources he or she has. As result opportunity, cost comes in, as someone has to choose between two options because he or she cannot have them both. Therefore, scarcity or resources makes a person make choices in acquiring a want because he does not have enough resources to acquire all that he wants. Scarcity therefore brings about choice which is an important part of economics since economics deals with the various issues affecting choice and how to solve such issues. The scarcity or resources bring about choice, which brings about activities that economics entails to meet the various wants of the people. As a result, without scarcity, there would be no choice and without choice, there would be no economics.