Scarcity (CIE IGCSE Economics)

• The basic economic problem is that resources are scarce
  • In economics, these resources are called the factors of production
    
    
• There are finite resources available in relation to the infinite wants and needs that humans have
  • Needs are essential to human life e.g. shelter, food, clothing
  • Wants are non-essential desires e.g. better housing, a yacht etc.
    
    
• Due to the problem of scarcity, choices have to be made by producers, consumers, workers and governments about the best (most efficient) use of these resources
  
  
• Economics is the study of scarcity and its implications for resource allocation in society
   

All Stakeholders in an Economy Face The Basic Economic Problem

• Economic goods are scarce in relation to the demand for them
  • This makes them valuable
  • Due to their value, producers will attempt to supply them in order to make a profit
  • Anything that has a price tag on it is an economic good e.g. oil, corn, gold, trainers, watches and bicycles
    
    
• Free goods are abundant in supply
  • Due to this abundance, it is not possible to make a profit from supplying free goods
  • Drinking water has been a free good for thousands of years, but as the population increases & water sources become more polluted, it has become an economic good
  • E.g. sunlight, the air we breathe, sea water