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Scarcity
Revision Notes
Key Points
- Scarcity is the fundamental economic problem of having limited resources to satisfy unlimited wants
- Causes of scarcity include limited natural, human, and capital resources
- Scarcity leads to competition, rationing, opportunity cost, and specialization/trade
- Scarcity forces individuals and societies to make choices about how to use their limited resources
- Understanding scarcity is crucial for economic decision-making and policy formulation
Definition of Scarcity
Scarcity refers to the fundamental economic problem of having limited resources to satisfy unlimited wants. In other words, there are not enough resources available to produce all the goods and services that people desire.
Causes of Scarcity
- Limited natural resources (e.g. land, oil, minerals)
- Limited human resources (e.g. labor, skills, knowledge)
- Limited capital resources (e.g. machinery, technology, infrastructure)
Effects of Scarcity
- **Competition** for limited resources
- **Rationing** of resources through pricing mechanisms or other means
- **Opportunity cost** of choosing one use of a resource over another
- **Specialization** and **trade** to make the best use of available resources