Question

a. What is scarcity and why does it exist? b. Explain the link between scarcity and each of the following: i. choice, ii. opportunity cost,

Answer 1

A. Scarcity refers to the economic problem, the gap between limited that is scarce resources and limitless human wants. This situation requires people to make decisions about how to allocate resources efficiently, in order to satisfy needs and as many additional wants as possible.

The resources that we value—time, money, labour, land, and raw materials exist in limited supply. This condition is known as scarcity.

Why does scarcity exist?

scarcity exists whenever what people would like to have exceeds what they are able to have.

scarcity will always exist as resources are limited but wants are infinite. As a result we have to allocate the existing resources most efficiently.

B.link between scarcity and choice.

Scarcity must require choice. We choose which of their desires they will satisfy and which they will leave unsatisfied either as individuals or as a society, choose more of something, scarcity forces us to take less of something.

B.Link between scarcity and opportunity cost.

Time is a very short resource because it is not renewable and time never comes back, when you are young you must work to live that generates an opportunity cost between working or doing any other activity.

If we decide and choose which want to satisfy with the available resource, there are other wants we have to leave unsatisfied. We have to go for something in order to satisfy a want. The want that is for is called the ‘opportunity cost.