1 Answer | Add Yours
Scarcity is the basic fact of economics. It comes about because we, as human beings, have unlimited wants and because we have only limited resources with which to try to fulfill those wants. Therefore, we have to make choices about what we buy and what we do. Therefore, every aspect of every sort of economics (both micro and macro) is connected to scarcity. Without scarcity, there is no such discipline as economics.
To take a specific example from macroeconomics, people have limited amounts of money. They can use their money to buy consumer goods or they can save it. When they save it, it typically gets invested. When money is invested, it tends to build economic capacity for the long term. However, it is not being used to increase aggregate demand in the short term. Thus, scarcity (in terms of money) means that we cannot spend as much as we want on consumer goods while, at the same time, saving and investing as much as we would like.
For microeconomics, an example would be the scarcity of skilled workers. There is only a finite number of people in the US, for example, with computer programming skills. Those people are demanded by a variety of different kinds of companies. Those companies must compete to find the best workers. Some of them will not get as many good workers as they need. This is due to the scarcity of workers.
We’ve answered 319,193 questions. We can answer yours, too.Ask a question