‭INTRODUCTION‬

‭The resources that we value—time, money, labor, tools, land, and raw materials—exist in‬
‭limited supply. There are simply never enough resources to meet all our needs and‬
‭desires. This condition is known as scarcity.‬

‭Scarcity, fundamentally, is the condition where the available resources‬

‭are insufficient to satisfy all human wants and needs. This imbalance is‬
‭the cornerstone of economic studies.‬
‭●‬ ‭Nature of Resources: Resources in economics refer to anything‬
‭that has utility and includes natural resources, human resources,‬
‭and capital. The scarcity of these resources is a universal reality,‬
‭affecting every economy.‬
‭●‬ ‭Unlimited Wants vs Limited Resources: The crux of scarcity lies in‬
‭the paradox of having limitless wants in a world of limited means.‬
‭This endless desire for more sets the stage for the crucial‬
‭economic problem of how to allocate scarce resources effectively.‬
‭●‬ ‭The Pervasiveness of Scarcity: Scarcity is not just a problem for‬
‭the poor or underdeveloped nations; it is a universal economic‬
‭issue. Even the wealthiest societies face scarcity as they decide‬
‭how to allocate their resources.‬
‭Exploration of Why Resources Are‬
‭Limited‬
‭Delving deeper into why resources are limited, several factors come into‬
‭play:‬
‭●‬ ‭Physical Limitations: The planet has physical limits. Natural‬
‭resources like minerals, oil, and even atmospheric capacity have‬
‭bounds.‬
‭●‬ ‭Sustainable Usage: Overuse of resources leads to depletion and‬
‭environmental damage, further exacerbating scarcity.‬
‭●‬ ‭Technological and Human Capacity: The level of technology and‬
‭the skills of the workforce can limit the efficient use of resources.‬
‭Advances in technology can sometimes alleviate scarcity but also‬
‭create new demands.‬
‭●‬ ‭Distribution and Accessibility: Sometimes, scarcity is more a‬
‭matter of distribution and accessibility rather than absolute‬
‭shortage. Political, social, and economic barriers can restrict‬
‭access to abundant resources.‬
‭Impact of Scarcity on Societies and‬
‭Economies‬
‭The implications of scarcity are profound and multifaceted:‬
‭●‬ ‭Resource Allocation: Scarcity forces societies to decide how to‬
‭distribute resources optimally. These decisions are not just about‬
‭quantities but also about the quality and types of goods and‬
‭services to be produced.‬
‭●‬ ‭Opportunity Cost and Trade-offs: Every choice made due to‬
‭scarcity involves an opportunity cost. This concept is central to‬
‭understanding economic decision-making. It's about what is given‬
‭up in order to obtain something else.‬
‭●‬ ‭Influence on Economic Systems: Scarcity is a key reason for the‬
‭existence of different economic systems (capitalism, socialism,‬
‭etc.). These systems provide frameworks for making decisions‬
‭about resource allocation.‬
‭●‬ ‭Social Implications: Scarcity often leads to inequality. How‬
‭resources are allocated can significantly impact the distribution of‬
‭wealth and opportunities within a society.‬
‭●‬ ‭Innovation and Efficiency: Scarcity can drive innovation as‬
‭societies strive to use resources more efficiently or find‬
‭alternatives.‬
‭Central Problems of an Economy‬
‭An economic problem generally means the problem of making choices‬
‭that occurs because of the scarcity of resources. It arises because‬
‭people have unlimited desires but the means to satisfy that desire is‬
‭limited. Therefore, satisfying all human needs is difficult with limited‬
‭means‬‭.‬

‭Causes of Economic Problem‬

‭●‬ ‭Scarcity of resources:‬‭Resources like labour, land, and‬
‭capital are insufficient as compared to the demand. Therefore,‬
‭the economy cannot provide everything that people want.‬
‭●‬ ‭Unlimited Human Wants:‬‭Human beings’ demands and‬
‭wants are unlimited which means they will never be satisfied. If‬
‭a person’s one want is satisfied, they will start having new‬
‭desires. People’s wants are unlimited and keep multiplying,‬
‭therefore, cannot be satisfied because of limited resources.‬
‭●‬ ‭Alternative Uses:‬‭Resources being scarce, the same‬
‭resources are used for different purposes. and it is therefore‬
‭essential to make a choice among resources. For instance,‬
‭petrol is used in vehicles and is also used for generators,‬
‭running machines, etc. Therefore, the economy should now‬
‭make a choice within the alternative uses.‬
‭List of Economic Problems:‬

‭(A) What to produce?‬

‭●‬ A ‭ country cannot produce all goods because it has limited‬

‭resources.‬
‭●‬ ‭It has to make a choice between different goods and services.‬
‭●‬ ‭Every economy has to decide what goods and services should be‬
‭produced.‬
‭●‬ ‭Example: If a farmer has a single piece of agricultural land, then he‬
‭has to make a choice between two goods, i.e., whether to grow rice‬
‭or wheat.‬
‭●‬ ‭Similarly, our government has to decide where to allocate funds, for‬
‭the production of defence goods or consumer goods, and if both,‬
‭then in what proportion.‬

‭(B) How to produce?‬

‭●‬ T ‭ his problem refers to the choice of technique of production. It‬

‭arises when there is an availability of more than one way to‬
‭produce goods and services.‬
‭●‬ ‭There are mainly two techniques of production. These are:‬
‭●‬ ‭Labour intensive technique(greater use of labour)‬
‭●‬ ‭Capital intensive technique(greater use of machines)‬
‭●‬ ‭Labour intensive technique promotes employment whereas capital‬
‭intensive technique promotes efficiency and growth.‬

‭(C) For whom to produce?‬

‭●‬ T
‭ he society cannot satisfy all the wants of all the people.‬
‭Therefore, it has to decide who should get how much of the total‬
‭output of goods and services.‬
 ‭●‬ S
‭ ociety has to make choice of whether luxury goods or normal‬
‭goods have to be produced. This distribution or proportion directly‬
‭relates to the purchasing power of the economy.‬

‭Examples of Economic Problems‬

‭CHIT-CHAT TIME‬
‭(In this conversation, Raju is asking his mother to cook pizza and‬
‭French fries for him. But Mother is in the dilemma that if she prepares‬
‭pizza for Raju, then how she could make salad for Raju’s father.)‬
‭Raju:‬‭I want my reward for this achievement.‬
‭Mother:‬ ‭Okay tell me. What do you want?‬
‭Raju:‬‭I want to eat Pizza and French fries. Please prepare it for me.‬
‭Mother:‬‭But Raju Vegetables are limited and today market is also‬
‭closed and I have to prepare salad for your dad. Either I can prepare 2‬
‭Pizzas or Full plate of salad.‬
‭Raju:‬‭No, I want to eat Pizza and French Fries anyhow.‬
‭(‭M
‬ other is thinking about what to prepare as vegetables are‬
‭available in limited quantities.)‬
‭Mother:‬‭Ok I will prepare 1 Pizza and French Fries for you and half‬
‭plate salad and French Fries for your dad.‬
‭(Mother is chopping potatoes for French fries and vegetables for‬
‭pizza)‬
‭Raju:‬‭Mom, How much time you will take to prepare my meal.‬
‭Mother:‬‭Dear, wait for 20 minutes.‬
‭(‭M
‬ other called Rahul, Your pizza and French fries is ready now‬‭)‬
‭Raju:‬‭Thanks Mom.‬
‭Mother:‬‭Did u like it? Is it Yummy?‬
‭Raju:‬‭Yes mom. Pizza is out of the world. But…‬
‭Mother:‬‭But.. what?‬
‭Raju:‬‭Fries served in McDonalds are different from ours, I mean‬
‭shape, size and crispiness of our fries is not up to the mark.‬
‭Mother:‬‭Yeah I agree, But McDonald prepare fries with the help of‬
‭automatic hi-tech machines. Dear, quality differs when goods made by‬
‭automatic machines (capital intensive technique) and when goods are‬
‭handmade (labour intensive techniques)‬
‭(In the above conversation Mom is trying to explain Rahul that‬
‭there are two types of production techniques i.e. Capital‬
‭intensive technique and labour intensive technique)‬
‭(Dad sitting on the dinner table and asking Rahul’s mother why‬
‭she has prepared only half plate salad)‬
‭Father:‬‭Sneha, why have you prepared only a half plate salad for‬
‭dinner today?‬
‭Mother:‬‭Today, Raju got full marks in Business studies Test.‬
‭Father:‬‭Oh wow! Great.‬
‭Mother:‬‭So he demanded to pizza. But Vegetables required to‬
‭prepare pizza fell short and market was also closed.‬
‭Father:‬‭Oh! Then what did you do?‬
‭Mother:‬‭Then I thought to make fries with pizza and spared some‬
‭vegetables for salad.‬
‭Father:‬‭Great job! You are smart wife and also a smart mother. Who‬
‭knows how to make optimum utilization and effective allocation of‬
‭limited resources. I think you are the true economist in our home.‬

‭Conclusion‬
I‭n essence, scarcity is a fundamental economic problem with‬
‭far-reaching implications. It dictates how resources are allocated,‬
‭influences policy decisions, and shapes the structure of economies.‬
‭For A-Level Economics students, understanding scarcity is crucial‬
‭for comprehending broader economic principles and their‬
‭applications in real-world scenarios.‬

‭REFERENCE‬

‭ amuelson, P. Anthony., Samuelson, W. (1980). Economics. 11th ed.‬

S
‭Montani G. (1987) Scarcity. In: Palgrave Macmillan (eds)‬
‭Dictionary of Economics. Palgrave Macmillan, London.‬
‭●‬ W
‭ ennerlind, C. C. (1999). The historical specificity of scarcity:‬
‭historical and political investigations (Doctoral dissertation, the‬
‭University of Texas at Austin).‬