What this lesson teaches
I can explain that scarcity means our wants are unlimited but the resources to meet them are limited.
Syllabus 8843, 1.1.1(a). Scarcity, choice and resource allocation: The Central Economic Problem is scarcity, arising from limited resources and unlimited wants
I can explain why scarcity forces people, firms and governments to choose how resources are used.
Syllabus 8843, 1.1.1(b). Scarcity, choice and resource allocation: Scarcity implies that choices have to be made in the allocation of resources between different uses
Make a guess
Which country faces scarcity: a poor farming country, or a rich country like Singapore?
- Only the poor country, because its people lack basic goods.
- Only Singapore, because it has so little land.
- Neither, because trade lets them buy what they lack.
- Both. Every country has limited resources compared with what people want.
Show the answer
Both. Every country has limited resources compared with what people want.
Scarcity is about wants outrunning resources. Singapore still has limited land and workers, so it still has to choose.
Resources are limited but wants are not, so every society must choose what to produce, how and for whom.
Scarcity means resources are limited compared with the wants they could satisfy. Land, labour, capital and entrepreneurship are the four factors of production, and each is limited.
Scarcity forces choice. Using a resource for one thing means it cannot be used for another.
Every economy must answer three questions: what to produce, how to produce it, and for whom.
Singapore feels scarcity sharply with land. The same plot can be used for housing, industry, parks or military training, and the government must choose between them in its Master Plan.
- Scarcity
- Limited resources, unlimited wants.
- Factors of production
- Land, labour, capital, entrepreneurship.
- Three questions
- What, how and for whom.
Worked example: One hall, two activities
A community centre has its hall free for three hours on Saturday. A music rehearsal and a sports session both need the whole hall at that time.
- The hall's time is scarce: it cannot host both.
- The centre must choose one, and the other group loses out.
- Even a rich community centre faces this choice. Scarcity is about limited resources relative to wants, not about being poor.
Watch out for this
Rich countries do not face scarcity.
Every country has limited land, workers and time compared with what its people want, so every country must make choices.
Check your understanding
Why does scarcity force choices?
- Using a resource for one purpose means it cannot be used for another.
- Governments limit what people can buy, so they must pick from what is allowed.
- Prices are too high for most people, so they can afford fewer of the things they want.
Show the answer
Using a resource for one purpose means it cannot be used for another.
Right. Limited resources with competing uses mean something must be given up.