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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