Scarcity Is the Central Economic Problem In All Societies Irrespective Of

The Type Of Economic System. Discuss.

In this essay we will be looking at how scarcity is an economic problem in all
societies. Eastern Africa is renowned for its harvesting difficulties food and water is
scarce which leads to scarcity of its resources leading to charities and other
countries to contribute i.e. Red Cross, Oxfam. However a central economic problem
is not only to third world developing countries such as Ethiopia and Sudan, but also
in developed countries such as the United States and the United Kingdom. Scarcity
is the excess of human wants over what can actually be produced (John Sloman 2009). Unlimited wants and limited needs, scarcity will never supply everyones
demands. In economics these limitations forces the government to use their
resources wisely. This could be food, construction for housing and weapons for
defensive purposes. A country can only produce so much with its resources until it
runs out in and affecting its services and productions.
The three important factors of production in economics, these are Land, Labour and
Capital (Sloman 2009). Natural resources such as land consist of raw materials for
example mineral deposits limited and so is the lands space. Labour is limited and so
are skills which is beneficial in productivity. Capital for investing in something in the
future such as machinery, factories, transportations etc. Every economy in the world
makes choices for its capital. Increase in capital is to be more productive and an
increase in capital is usually achieved by saving. However this is time consuming,
therefore a problem in all societies irrespective of the economic system.
Scarcity needs choices, the choices made usually leads to sacrificing an alternative.
This is called an opportunity cost. This is cost of doing something measured in
terms of the best alternative foregone (Sloman 2009). Opportunity costs are an
important concept in economics this therefore leads us to encounter trade-offs. An
example of this is when a country focuses on uses their capital resources more on
weapons for defensive purposes and therefore trades-off using capital in food. As
(Sloman 2009) states, this is also known as guns vs. butter trade-off. Opportunity
costs allows society to make choices beneficial to their economy and to learn by
making sensible decisions due to scarcity. This is one reason why scarcity is a
central economic problem in most societies.
On the other hand, there are diagrams to help economists such as the Production
possibility curve.

The production possibility curves show how much the economy can do for
production and how much it would have to sacrifice. This therefore shows
opportunity cost and choice. PPC diagrams show targets to reach on the curve
which is done by trying and shifting the curve. Due to unlimited wants and limited
needs PPC reflect on a societys scarcity and the fact that scarcity is an economic
problem in societies.
One way of viewing that a product or resource is scarce is by the pricing. This is an
assumption by Adam Smith (1723-1790) that prices reflect its value. To some extent
this is true as it affects consumer demands for certain products. Pricing helps public
to be realistic and make reasonable choices in buying within their financial limits.
Overall if scarcity was only a myth in the world and we all had unlimited resources,
wants and are able to satisfy and receive them quick, then there would be no such
thing as economics. An economist at the university of Stanford University (Thomas
Sowell) stated that The central fact of economics is scarcity. There is never enough
of anything to satisfy all those who want it.
To conclude scarcity effects all societies around the world irrespective off the type of
economic system they use. It all leads to opportunity costs and choices that would
have to be made to benefit the society and economy off the nation.

Reference
Author: N/A. Economic Scarcity (N/A)
http://www.kingwatch.co.nz/Christian_Political_Economy/economic_scarcity.htm {Assessed
27 September 2012}
Alison Rilley. What is Scacity in Economics? (December 19 2011)
http://www.ehow.com/facts_5175741_scarcity-economics_.html {Assessed 27 September
2012}
John Sloman & Alison Wride (2009) - ECONOMICS seventh edition Prentice hall
Financial Times.
Productive Possibility Curve Image. Author: User:Everlong Date: 18 December 2006
http://en.wikipedia.org/wiki/Production%E2%80%93possibility_frontier {Assessed 28
September 2012}
Shane Hall. Why Is The Problem of Scarcity Important In Economics? (N/A)
http://www.ehow.com/about_6323181_problem-scarcity-important-economics_.html
{Assessed 27 September 2012}
Bibliography
John Sloman & Alison Wride (2009) - ECONOMICS seventh edition Prentice hall
Financial Times.