Topic 1 - 1.1 The economic problem of scarcity. 1.2Unlimited needs, wants and scarce resources. 1.3 Scarce goods and free Goods Flashcards
Explain the economic problem of scarcity
The economic problem of scarcity arise because of limited resources that’s available for production of goods and services, while our needs and wants for goods and services are unlimited.
People normally wants more than can be produced.
People are forced to choose between alternatives, because they might not have enough income to purchase the goods or services they need or want.
Explain the meaning of unlimited needs and wants
Needs are things we really require to survive, such as basic food, clean water, shelter and basic clothing.
Wants are things we feel might improve our lives, but we do not really need these things to survive.
Example: Luxury cars, latest smartphone and designer clothes etc.
When a need or want has been satisfied, there is always something else to take its place.
Example: more food, more love, more free time, because what we have never seems to be enough.
Scarce resources
Economics are also concerned on how best to satisfy these unlimited needs and wants.
Resources at our disposal to produce the goods and services to satisfy our needs and wants are limited. There aren’t enough resources to produce all the things we need and want.
Example: Seven billion people in the world has a basic need for food. On Earth there is only so much land available that can be used to cultivagte the crops to feed everyone.
Three main groups of resources
- Natural resources
Land, Water, Minerals, Animals, Plants - Human Resources
Entrepreneurs, Economists, Builders,
Architects, Accountants, Lawyers and
cleaners - Man-made Resources:
Machines and Infrastructure(Resources
Capital)
What is a Scarce good?
A Scarce good is one for which the choice of one alternative requires that another be given up.
Example: a parcel of land that can be used for serveral alternative uses.
What is a Free good?
A Free good is one for which the choice of one use does not require that we give up another.
Example: Gravity is holding everyone on the Earth. One person’s use of gravity is not an alternative to another person’s use.
