Microeconomics Lecture: Scarcity

Presenter: Jacob Reed (ReviewEcon.com)

Overview

• Introduction to series on microeconomics for exam preparation.
• Focus on the fundamental problem of scarcity in economics.

Scarcity: Definition and Concepts

• Scarcity: Inability of limited resources to satisfy unlimited wants.
• Human desires exceed available resources.
• Scarce items have a positive price and opportunity cost.
• Examples of scarce items: food, iPhones, sports cars.
• Non-scarce items: More available than wanted (e.g., air, trash).
• Non-rival goods: Knowledge (one's use doesn't diminish availability for others).

Reasons for Scarcity

• Resources needed for production are scarce:
  1. Land: Natural resources (minerals, soil, water, sunlight).
  2. Labor: Human physical and mental effort.
  3. Physical Capital: Tools and machines used for production (e.g., industrial robots, scissors).
  4. Entrepreneurship: Individuals who combine resources to produce goods/services and seek profit.

Implications of Scarcity

• Allocation of Resources: Involves trade-offs (e.g., using labor for gaming vs. yard work).
• Business Trade-offs: Companies must decide resource allocation (e.g., Apple producing laptops vs. cell phones).

Scarcity vs. Shortage

• Scarcity: Permanent condition of limited resources vs. unlimited wants.
• Shortage: Temporary condition where quantity supplied is less than quantity demanded at the current price; leads to price increases or stock depletion.

Conclusion

• Scarcity is a fundamental concept in economics that impacts individuals and businesses.
• Understanding scarcity helps in making informed decisions on resource allocation.
• Stay tuned for more topics in microeconomics.

Next Steps: For further study, visit ReviewEcon.com and consider the Total Review booklet for comprehensive exam preparation.