Scarcity and Choice

We have a problem

• Our wants are unlimited, and they keep changing.

• The resources that satisfy these wants are limited.

• We as humans are considered to be economic animals.

• This problem in economics can be summarized by one word “scarcity”.

• Scarcity is the excess of human wants over what can be produced.

Economic goods

• The concept of scarcity applies mainly to economic goods because these goods require some human effort to produce them.

• An economic good is a scarce good.• So a car is an economic good.

Free goods

• Free goods (air) are easily accessible by all and abundant in supply.

Choice

• A consequence of scarcity is that we have to make choices.

• Choice is made when one alternative is selected over another.