Aguda, Nina Francine M.

FIN221

Economics and Scarcity

Scarcity – the state of being limited; simply not enough resources to meet all our needs
and wants.
Needs refers to the necessities.
Wants refers to the luxuries in life wherein people can live without because it can
just give you additional satisfaction and can only have more than the means of
acquiring the needs.
“Because these resources are limited, so are the numbers of goods and services
we can produce with them. Combine this with the fact that human wants seem to
be virtually infinite, and you can see why scarcity is a problem.”

Economics – a social science that deals with the optimum allocation of scarce economic
resources to satisfy the unlimited needs and wants of man; the study of how humans
make choices under conditions of scarcity.
Economics helps us understand the decisions that individuals, families,
businesses, or societies make, given the fact that there are never enough
resources to address all needs and desires.
“In a world of scarcity, it is impossible to meet all society’s wants.”

Economic Goods – scarce goods are those for which the demand would be greater than
the supply if their price were zero; goods or services a consumer must pay to obtain.
“Because of this shortage, economic goods have a positive price in the market.
That is, consumers must pay to get them.”

Free Goods – a good whose supply is greater than the demand if their price were zero
since consumers can obtain all they want at no charge; a consumer can obtain for free
because they are abundant relative to the demand.
Calculus is a free good because no one owns it, and it is used by everyone.
 Aguda, Nina Francine M.
FIN221

“We used to consider air a free good, but increasingly clean air is scarce.”

Productive Resources – resources must be able to produce something; the inputs used
in the production of goods and services to make a profit; also called factors of production:
Land consists of gifts of nature which includes all-natural resources above, on,
and below the ground; serves as raw materials in the production process.
“Examples are any natural resource, including actual land, but also trees,
plants, livestock, wind, sun, water, etc.”
Economic Capital is anything that’s manufactured to be used in the production of
goods and services.
Financial Capital represents the monetary resources companies use to
purchase (not productive).
“Example is money.”
Economic Capital represents the major physical assets individuals and
companies use when producing goods or services (productive).
“Examples are machinery, tools, buildings and equipment.”
Labor is also referred to as human capital; any human service—physical or
intellectual; transforms the raw materials into finished products.
Entrepreneurship is the ability of someone to recognize a profit opportunity,
organize the other factors of production, and accept risk.
Entrepreneur is the organizer and coordinator of the other factors of
production.