BSED Major in Social Studies 2

Scarce or Scarcity

In economics, scarcity refers to the basic problem that resources are limited, but human wants and needs are virtually unlimited. A resource is considered scarce if it is not freely available in unlimited quantities. Here are a few examples of what is typically scarce:

1. Natural Resources: These include oil, coal, water, and land. They are finite and cannot be replaced once exhausted.
2. Time: Everyone has only 24 hours in a day, making time a scarce resource.
3. Money: People generally do not have unlimited wealth, so they must make choices on how to spend it.
4. Labor: Skilled workers may be limited in number, making their time and expertise scarce.
5. Capital: Factories, machines, and other tools of production are finite and expensive to acquire.

Since resources are scarce, economics deals with how societies allocate these resources efficiently to satisfy human needs and wants.

Here’s an example to illustrate scarcity:

Example: Imagine a small island with 100 people and only 50 coconut trees. The coconuts from these trees are a vital source of food, but there aren't enough coconuts for everyone to have as much as they want. The coconut trees are a scarce resource because there are limited quantities, but the demand for coconuts is much higher.

Explanation: Scarcity arises when the wants or needs for a resource exceed its availability. In this example:
- The scarce resource is the coconuts, which are limited because there are only 50 trees.
- The demand for coconuts is greater than the supply, as there are 100 people, but not enough coconuts for all of them.

Because of scarcity, the people on the island must make choices about how to distribute the coconuts. They may decide to ration them, trade them for other goods, or find ways to grow more coconut trees in the future. This process of making decisions about limited resources is the foundation of economics.

In a broader context, all societies face similar choices about how to allocate limited resources like food, water, land, and time to satisfy people's needs and desires.

The concept of scarcity has been central to economic thought for centuries, but it was most systematically explored and formalized by early economists during the development of classical economics in the 18th century.

One of the key figures in formalizing the concept of scarcity was Adam Smith, often referred to as the "father of modern economics." In his 1776 book "The Wealth of Nations," Smith discussed how resources are limited and how this affects production and trade in society.

Later, economists like David Ricardo and Thomas Malthus expanded on these ideas, particularly in the context of land and population growth. In modern economics, scarcity is recognized as a foundational principle and is deeply integrated into economic models developed by many theorists.

While no single person can be credited with "discovering" scarcity, Adam Smith and his contemporaries played a major role in shaping our modern understanding of the concept.