We can't have everything that we want so we have to choose. Because of scarcity we as individuals, and our society as a whole, must make choices.
For example when I was thinking about buying a boat, I also needed shoes for my daughter. If we assume that I couldn't afford both again - can you afford everyhting that you want?
I had a choice to make a boat or shoes? Our goal is to make choices that reduce scarcity as much as we can. Because of unlimited wants we can never eliminate scarcity, but it can be reduced by the right choices.
Hopefully, this is what governements attempt to do: make the right choices to reduce scarcity and increase the standard of living for their citizens. We don't want to make just any choice, we want to make the BEST choice. There are three, and only three, options choices for society to deal with scarcity, and all societies must deal with scarcity because there are limited resources and unlimited wants.
This is not the way the term is normally defined. Later this semester we'll discuss the various definitions of Economic Growth, but here we'll use this more fundamental definition:. This means we are ABLE to produce more, but it doesn't necessarily mean we do produce more.
More on this later. If we only had more resources we could produce more goods and services and satisfy more of our wants. This will reduce scarcity and give us more satisfaction more good and services. All societies therefore try to achieve economic growth. A second way for a society to handle scarcity is to reduce its wants. If we just didn't want so much then there would be less scarcity.
For example we know that gasoline is scarce. Can you get all that you want for the price you want? If you have to pay a price for something, then it is scarce. Space on our roads is also often very scarce.
This would reduce the scarcity of gasoline and space on our roadways, but. Maybe during war time, if our president asks us to "share a car with our neighbor", we would. But it is not a long-term solution to the problem of scarcity that most of us would accept. Although it is an option that we should keep in mind. That brings us to the third option for dealing with scarcity and to the remaining 4 "E's" of economics. Societies can reduce scarcity not just by 1 getting more resources, better resources, or better technology i.
I call these the 4 Es of economics - four ways to use our existing resources to reduce scarcity and obtain the maximum satisfaction possible. Societies will try to achieve all 5 Es of economics. This reduces scarcity and gives us more satisfaction from our existing resources. Let's look at each of these individually using some examples. REMEMBER our goal is to understand how they reduce scarcity and help society achieve the maximum satisfaction possible from its existing resources.
This is the goal of economics. You must keep this goal in mind as we go through these examples. If businesses use extra resources that they do not need, then these resources are wasted. Since we know that resources are limited and human wants are unlimited, let's not waste any of the few resources that we do have. Let's assume that Harper College employs 50 janitors to clean its buildings and that's enough to do a good job.
If Harper then hired 25 more janitors this would be wasteful. Even though they could probably find something to do to keep busy, they aren't needed. Fifty janitors can do the job. So society would be better off if Harper did NOT employ these additional janitors so that they could go get a job somewhere else like maybe at a boat factory where they would produce more for society. It would be productively inefficient to employ 75 janitors at Harper.
Harper's costs will be higher productive inefficiency and society's output would be lower less satisfaction. Several years ago, one of my students gave me this example. She had visited Moscow when the communist Soviet Union still existed.
She said that she was surprised when she entered a grocery store and saw four employees at every cash register! What a waste of labor resources. In the US we find one, or two, workers at a checkout stand and only a few will be open. In Moscow ALL stands were open with four employees each. This is productively inefficient. Their costs are higher and since labor is being wasted, they will produce less. They are not achieving the maximum satisfaction possible from their limited resources productive inefficiency.
Take a brief look at one or a few of the following news articles. When you click on the link they should appear in a new browser window.
If each company was able to continue producing the same amount of output after laying off thousands of workers then they must have been productively inefficient before the layoffs. I realize that this may be a bit controversial. If you have questions let's discuss them on our discussion forum. When you click on the link it should appear in a new browser window. Keep in mind the GOAL: reducing scarcity and achieving the maximum satisfaction possible from our limited resources.
If these companies can still produce the same amount of output with thousands fewer employees, by laying them off they become available to work somewhere else producing MORE for society.
BUT, will they find another job? These articles indicate that in today's economy they probably will:. Would it be better for society to have them stay at companies where they are not needed or to be unemployed collecting unemployment compensation or welfare? I would consider the possibility that it would it be BETTER for society to have them be unemployed collecting unemployment compensation or welfare. Not all layoffs are good for society.
See: lay-offs. Removing book from your Reading List will also remove any bookmarked pages associated with this title. Are you sure you want to remove bookConfirmation and any corresponding bookmarks? My Preferences My Reading List. Explaining The K-Shaped Economic Recovery from Covid A K-shaped recovery exists post-recession where various segments of the economy recover at their own rates or levels, as opposed to a uniform recovery where each industry takes the same Both on paper and in real life, there is a solid relationship between economics, public choice, and politics.
The economy is one of the major political arenas after all. Many have filed for bankruptcy, with an The economic problem All societies face the economic problem , which is the problem of how to make the best use of limited, or scarce, resources. Limited resources Resources are limited in two essential ways: Limited in physical quantity , as in the case of land, which has a finite quantity. Limited in use , as in the case of labour and machinery, which can only be used for one purpose at any one time.
Choice and opportunity cost. What to produce? Business Economics. Given the demand for housing, some locations are more expensive than others, though, and you may have chosen to spend more money for a convenient location or to spend less money for a place that leaves you spending more time on transportation.
Housing decisions always have to take into account what someone can afford. Individuals making decisions about where to live must deal with limitations of financial resources, available housing options, time, and often other restrictions created by builders, landlords, city planners, and government regulations. Take the time to watch them! Every society, at every level, must make choices about how to use its resources. Families must decide whether to spend their money on a new car or a fancy vacation.
Towns must choose whether to put more of the budget into police and fire protection or into the school system. Nations must decide whether to devote more funds to national defense or to protecting the environment.
Economics helps us understand the decisions that individuals, families, businesses, or societies make, given the fact that there are never enough resources to address all needs and desires.
Most goods and services are economic goods , i. Scarce goods are those for which the demand would be greater than the supply if their price were zero. Because of this shortage, economic goods have a positive price in the market. That is, consumers have to pay to get them. What is an example of a good which is not scarce?
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