IN MY  TEXTBOOK IT SAYS SCARCITY FORCES US TO MAKE CHOICES, LIKE SHOULD I PAY OF MY CAR LOAN OR GO TO HAWAII.THAT MEANS THERE IS SCARCITY OF MONEY?IF IT GIVES IN MY ECONOMICS TEXTBOOK AN EXAMPLE...

IN MY  TEXTBOOK IT SAYS SCARCITY FORCES US TO MAKE CHOICES, LIKE SHOULD I PAY OF MY CAR LOAN OR GO TO HAWAII.THAT MEANS THERE IS SCARCITY OF MONEY?

IF IT GIVES IN MY ECONOMICS TEXTBOOK AN EXAMPLE LIKE THAT SHOWING THAT SCARCITY MAKES US MAKE CHOICES THEN THE ONLY REASON WHY I WOULD HAVE TO MAKE A CHOSE BETWEEN THE 2 IS IF THERE IS SCARCITY OF MONEY THAT IS THE ONLY THING THAT IS FORCING ME TO MAKE THE DECISION RIGHT?

Asked on by jkjhgbh

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

In essence, you're right.  You can't do both because you don't have an inifinite amount of money.

Economists don't typically talk about money as scarce because money is not a resource.  Instead, it's just something that's used to buy resources.  In an economy as a whole, scarcity of money is not really an important thing.  The government could print infinite amounts of money, but the money would still be competing to buy finite amounts of goods.

You can also think of this in personal terms.  Your scarcity of money is really a scarcity of resources too.  You don't have infinite time and infinite talents with which to make infinite amounts of money.  So in a sense it's not so much that you lack money as that you lack resources.

However, in an immediate sense, yes, you're right.  The immediate factor that causes you to have to choose between those two things is the fact that money is (for individuals) scarce.

Does that make sense?

 

krishna-agrawala's profile pic

krishna-agrawala | College Teacher | (Level 3) Valedictorian

Posted on

In economics, when we talk of scarcity in economics, it refers to scarcity of resources. And resources refers to inputs we use to produce useful goods and services we would like to have. In economics, these resources are also called factors of production, which are typically classified as labor, land and capital. Capital refers to durable goods used in production of other goods. Labor refers to all type of work performed b people. Land refers to not just the land used for agriculture or other purposes but all the natural resources taken from above or below the soil. Thus all raw material used in production are classified as land because in ultimate analysis these are derived from nature. Money is neither a factor of production, nor a finished product that is used by people to obtain some satisfaction. Money is only a means of facilitating exchange of goods and services, including factors of production between people.

It appears to us that we lack money so we cannot buy things. So we think money is scarce. But in economics this money available with us only represents our share of all the goods produced and available in economy. And how we choose to spend our money impacts the way society allocates its scarce factors of production to producing different goods. For example, how much of wheat the farmers produce in their farms is determined by the market price of wheat, which itself is determined by amount of money all the people in an economy are willing to spend on wheat and other products made of wheat.

It is worthwhile noting that factors of production or goods that are abundant rather than scarce are available free. Take for instance the air we breathe. It is the most essential thing in our life, We cannot live without breathing air even for five minutes. Still air is available to us absolutely free. This is because air available in abundance. The total quantity of air available to a society is much more than the total air it needs to use.

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