SOCIAL SCIENCE 5: ECONOMICS

KEY CONCEPTS IN ECONOMICS | MODULE 5 LESSON 5.1

TARGET
At the end of this module, you will be able to:
define scarcity and efficiency;
discuss scarcity in relation to human needs and wants; and
exemplify the concepts of scarcity and efficiency in relation to one’s everyday activities.

Suggested Time: 1 min | Actual Time Spent: ____min(s)

From the previous topics, Economics is defined as a social

science that deals with the efficient allocation of scarce resources
to satisfy unlimited human wants and needs.
This definition gives us two ideas: (1) there is scarcity of
resources and (2) these resources should be allocated efficiently.
Thus, the notion of scarcity and efficiency have been central in
the study of economics.

Suggested Time: 2 mins | Actual Time Spent: ____min(s)

Sowell (1930), a US economist, stated that “The first lesson of economics is scarcity: there is
never enough of anything to satisfy all those who want it.” (as cited in Abbot et al., 2012, p.13).
Scarcity has been part of our lives since the resources we have are finite or limited. What do you
think will happen if the resources are not scarce? People will probably not worry since it will make
no sense to put effort in figuring out how to make the most out of the resources if they are unlimited.

Scarcity, as an economic problem, does not exist just because the resources are limited
physically. The problem arises mainly because of our nature as humans. As much as we should
prioritize our “needs” first over our “wants”, we never get contented of the things that we have
making our wants unlimited. Satisfying our unlimited wants, given the scarcity of resources, leads
to the problem of allocation.

Allocation of resources to different areas or groups of people is one of the major concerns of
economics. How do you think people use their resources? How does the government allocate the
country’s budget? A critical criterion in doing such is efficiency. Efficiency is concerned in the best
possible way of employing resources (i.e. least cost and time wasted but of highest quality).

Social Science 5: Economics | Page 1 of 3

 Moreover, Samuelson and Nordhaus (2010) stated that “Economic efficiency requires that
an economy produce the highest combination of quantity and quality of goods and services given its
technology and scarce resources. An economy is producing efficiently when no individual’s
economic welfare can be improved unless someone else is made worse off.” (p.4). With this,
economic efficiency will only be achieved if the allocation of resources is at the point where no
individual can be better off without making anyone else worse off. This is also known as Pareto-
efficiency, after the name of an Italian economist, Vilfredo Pareto.

Take the situation of Ava and Amy as an example. They own a garden and Ava wants to
plant it with flowers while Amy wants to plant it with vegetables. If only one type must be chosen
(either flowers alone or vegetables alone) what do you think will they feel? One of them would
obviously be worse off. On the other hand, if they agreed to a specific combination, say
combination X, of the number of flowers and vegetables to be planted and altering it would make
the other person worse off, then combination X is already Pareto-efficient.
The resources are limited and finite yet there are unlimited human needs and wants.
Economics aims to address this problem by allocating the resources efficiently. The allocation is
said to beWith the discussion
efficient above,
if the resources arethe conceptinoftheeconomic
employed efficiency
best possible mannerwill
(i.e.help
least not
costjust
and the
policymakers
time wasted butand government
of highest in utilizing
quality) and if wethe resources
attained but also us,
the situation individuals,
where we cannotin better
managing
off aneven
the simplest
individual or smallest
without scarce
worsening resourceelse.
somebody we This
have.is From our day-to-day
also known decision making in sorting
as Pareto-efficiency.
our needs and wants up to the societal decisions made in the country, one thing should always be
kept inEfficiency
mind – our is aresources are limited
critical criterion in and should society’s
managing be used wisely.
resources.Efficient
It also allocation
guides the of
resources while dealing with scarcity is what makes economics important especially in
individuals, government, and policymakers in decision making. People should always be reminded
addressing the needs and wants of the people and the society.
that resources are limited and that it is essential to efficiently allocate them.
Suggested Time: 10 mins | Actual Time Spent: ____min(s)

Non-Graded Alternative Assessment (10 points):

Thinking exercise!
Graded Formative Assessment (15 points):
After learning the concept of scarcity and efficiency, it is time for its application. Kindly answer the
following
For further questions
applicationand
of refer to the table
the concepts youbelow for the from
have learned rubric.this module and enhancement of your
critical thinking, answer the following questions. Kindly use the same rubric from the “Navigate”
part. 1. How does scarcity bring about the problem of allocation? Give a concrete example and
explain using 3-5 sentences.
1. Budget Allocation
2. What A. parts
As aofstudent,
your life highlighted
you the importance
are subjected to a limitedofallowance
efficient allocation of resources?
and efficient Give
allocation is
at least important.
two examples
Howandareexplain eachtobriefly.
you going budget your “hypothetical weekly allowance” of
Php 1500? Kindly show it by filling out the blank spaces below. (5 points)

5 POINTS 3 POINTS 2 POINTS

Content The concepts discussed are
(50%) applied and reflected in the
answer with strong points.
Clarity Content was discussed clearly
(30%) and coherently. The main idea
can be fully grasped.
Examples Extensive details and examples
(20%) are provided which fully
supported the arguments.
The concepts are discussed
and applied in the answer but
lack strong points.
Content are somehow clear
and coherent. The main idea
is present but cannot be fully
grasped.
Some details and examples
are provided thus the
arguments are not fully
supported
The concepts discussed
are limited and do not
have strong points.
Content was confusing
and not coherent. The
main idea is not clear or
not present at all.
Provided unclear
examples or didn’t
provide examples at all

Suggested Time: 5 mins | Actual Time Spent: ____min(s)

Social Science 5: Economics | Page 2 of 3

B. As you budget your weekly allowance, what are your considerations? Why do you
think is it important to sort out your needs and wants and identify which ones
References:

Abbot, G., Farndon, J., Kennedy, F., Meadway, J., Wallace, C. & Weeks, M. (2012). The
Economics Book. New York: DK Publishing.

Government of UK. History Past Prime Ministers. Retrieved from

https://www.gov.uk/government/history/past-prime-ministers/benjamin-disraeli-the-
earl-of-beaconsfield

Samuelson, P. A. & Nordhaus, W. D. (2010). Economics (19th ed.). New York: McGraw-Hill
Education.

Prepared by: Nneka B. Evangelista

Position: Special Science Teacher 1
Campus: PSHS-CALABARZON

Reviewed by: EDGAR F. ALMERO, Ed.D.

Position: SST V
Campus: PSHSWV

Social Science 5: Economics | Page 3 of 3