1.1 Scarcity
Scarcity means unlimited wants exceed limited resources, so every economic choice forces a trade-off and carries an opportunity cost.
Scarcity is the starting point of all economics: society's wants are unlimited, but the resources available to satisfy them are not. Those resources are the four factors of production, land (natural resources), labor, capital (tools and machines), and entrepreneurship.
Because resources are scarce, choosing to use them one way means giving up their next-best use. That sacrificed alternative is the opportunity cost, and it attaches to every decision an individual, firm, or government makes.
Keep scarcity separate from a shortage. Scarcity is permanent and applies to nearly everything; a shortage is a temporary market condition where quantity demanded exceeds quantity supplied at a price held below equilibrium.
Key terms for 1.1
Treating scarcity and shortage as synonyms. Scarcity is the universal, permanent condition of limited resources; a shortage is a temporary gap between quantity demanded and quantity supplied at a specific price.
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