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Scarcity

What does it mean for something to be scarce? The dictionary definition of scarce says "insufficient to the demand," but the meaning in Economics is slightly different. In Economics, when something is scarce, it means that it is not plentiful and not distributed evenly. An example of this would be oil.

If something is rare, however, then it is very uncommon. An example of a rare resource would be rare Earth minerals.

Finally, in order for something to be considered limited in Economics, it must be not infinite. A limited resource would be solar energy.

All resources are limited in some way.

 Time and money are both limited. There is a finite amount of money in the world, and although it may seem like some people have a lot, their money is not unlimited.

Everything is made out of something, and everything is limited. That fact raises the question "what should we use resources for?"

This is when we must begin thinking about opportunity costs. Everyone makes decisions, and an opportunity cost - also known as an trade-off - is the value of the best option not chosen. Every decision has an opportunity cost, and how high the costs are depends on the type of decision made. Opportunity costs help us make decisions. And making the right decisions based on opportunity costs is economics.

But where are all of the options coming from? They're being presented by producers, who make widgets for consumers to buy. A widget is a good or service, and a consumer is a customer who is looking to buy a good or service. The producer makes the widget, and the consumer receives the widget.

Producers are affected by limits. When resources are limited, they can't make every widget. They must choose which widget to produce based on if they think it will sell or not.





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