THE CONCEPTS OF ECONOMICS: SCARCITY
To fully grasp the essence of what economics is, we must first understand the concept of scarcity along with the branches of study under economics that are macroeconomics and microeconomics. All of the succeeding discussions regarding economics will be anchored in these concepts. Before we can deal with the basics of production, growth, and trade among others, let’s first lay the background.
Scarcity is the tension created between the limited sources we have versus the unlimited desires we have. Limited resources for an individual and the nation differ. Time, money, and skill are some of the resources that an individual may exploit. Meanwhile for a nation, the natural resources, the labor force, technology, and many more are all listed as limited resources.
For instance, you want a new SLR camera and a new gaming console but instead you settle for a new smart phone. You forgo the other two gadgets due to your lack of money. Another example is going to an amusement park. You want to try all the rides and you have an all day pass. However, you have to forgo some of the rides due to the fact it is impossible to take every ride as there is too many of them to be done in one day. For a country, the limits on natural resources are obvious. It takes time to grow trees, fossil fuels are running out, mines can only last as long as they have precious metals, and much more. For the labor force, people age, cutting down their ability to work. Some of them don’t even get to do work with people consciously choosing to be bums. Limited resources, like in individuals, vary from nation to nation. One nation may be rich in oil while others in crops. These means that each country have varying levels of scarcity depending on the limited resources. Scarcity greatly affects not only the prices of a good or service, but it also shapes the nation. Sharing these limited resources to satisfy the wants of every individual in the world in exchange for what resources they are willing to give up is the essence of economics.
Economics study why we choose what we chose. It analyzes and examines the allocation of resources the individual and the nation partakes in and how we do this in the most efficient way.
The main concept is that there is a limit as to everything and that our wants will not be all accommodated. And to satisfy a part of your wants, some things must be sacrificed.
In the next article we will continue the discussion about the branches of study under Economics: Microeconomics and Macroeconomics.