Microeconomics Lecture: Scarcity

Introduction

• Lecturer: Jacob Reed, ReviewEcon.com
• Purpose: Series covering essential topics for microeconomics exams.
• Additional Resource: Total Review Booklet at ReviewEcon.com.
• First Topic: Scarcity.

Definition of Scarcity

• Scarcity: Inability of limited resources to satisfy unlimited wants.
  • Human wants exceed available resources.
  • Example items: Food, iPhones, sports cars.

Characteristics of Scarce Items

• Scarce if there is less of it than desired.
• Typically have a positive price.
• Have an opportunity cost: Require giving up something to obtain them.
• Examples:
  • Goods at grocery stores.
  • Digital goods on the internet.
  • Services like haircuts.

Non-Scarce Items

• More of the item than needed or wanted.
• Examples:
  • Air (plentiful, no scarcity).
  • Trash (negative price, not scarce).
  • Free items (obtainable without cost).
  • Established knowledge (non-rival).

Reasons for Scarcity

• Resources used to make goods/services are scarce.
• Four Resources for Production:
  • Land: Natural resources (minerals, soil, rain, sunlight).
  • Labor: Mental/physical work of humans.
  • Physical Capital: Goods used to produce other goods (machines, tools).
  • Entrepreneurship: Combining resources to produce goods/services.

Implications of Scarcity

• Necessitates allocation and trade-offs of resources.
• Personal and business trade-offs:
  • Personal: More video games leads to less yard work.
  • Business: More laptops produced means fewer cell phones.
• Decisions on resource use are critical.

Scarcity vs. Shortage

• Scarcity: Less of an item than desired.
• Shortage: Quantity supplied < Quantity demanded at current price.
  • Shortage leads to price increase or stock depletion.

Conclusion

• Scarcity is a fundamental concept in economics.
• Understanding scarcity is essential for making economic decisions.

• Next Steps: Further topics to be covered in subsequent lectures.
• Contact Information: Visit ReviewEcon.com for additional help.