THE PROBLEM OF SCARCITY
What does the term 'scarcity' refer to in the field of Economics? |
Scarcity involves making choices. Scarcity means individuals, businesses and governments have to deal with the
problem of unlimited wants, but limited resources. Every economic
system, from capitalism to socialism, has to deal with the problem
of scarcity whereby the demand is greater than the supply. Which goods and services are scarce in a society is
determined by the geography, culture, and political system of that
society. The concept of
scarcity is the foundation for the field of economics.
Individuals, businesses and
governments are all affected by the problem of scarcity. A college
student with a few hundred ringgits to spend can either opt to spend that
money on a variety of items, from a stereo system to a computer; or
not spend the money at all.
Whatever
choice is made, there will be advantages and disadvantages
associated with it.
Businesses are also faced with making choices. If a business has surplus funds available, the management might need to decide if they should hire an additional worker or purchase a new computer system. Governments have to make choices too. For example, if a government has a surplus, it can choose to either build new roads or to provide additional health care coverage to its senior citizens.