Scarcity

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Definition of Scarcity:

Scarcity refers to limitations of resources that must be used to achieve an economic objective.

Detailed Explanation:

The most basic economic problem is how to allocate scarce resources to achieve an economic objective. We have unlimited wants, but limited resources. Choices must be made. Identifying all of the options and then allocating our scarce resources is fundamental to economic theory. Everyone must make decisions based on limited resources. A student may have to choose between spending time studying or watching television because time is a scarce resource. A business may be forced to choose whether to invest in advertising or new equipment because capital is limited. Scarcity, however should not be mistaken for poverty. Even the wealthiest individuals and companies deal with scarce resources.

Value and Scarcity Flipbook

Here is a short video further explaining the concept of scarcity.

Dig Deeper With These Free Lessons:

Managing Scarcity
Opportunity Cost - The Cost of Every Decision
Production Possibility Frontier
Circular Flow Model - We Depend On Each Other

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