Scarcity and Choice: The Emergence of Economic Problems
The wants of human beings are limitless and resources to fulfill them are limited. It is a fact that the total quantity of products that can be produced by applying the productive resources of an economy is insufficient to satisfy all the needs and wants of the people. When the wants of people exceed their resources then it is known as scarcity. Scarcity is the fundamental problem of every society/nation. As a consumer, all the time we people always face scarcity of something like scarcity of income, scarcity of products, etc. Therefore, scarcity is the situation in which people have limited resources to satisfy all their desires.
Scarcity is a relative term rather than an absolute because the situation scarcity is observed relatively with the volume of demand. It means scarcity does not mean something is unavailable, but it means something is available in a limited volume in comparison to human wants. Thus, in economics scarcity explains the relationship between limited resources and unlimited wants and shows goods are scarce relative to wants. In other words, economic scarcity refers to the basic fact of life that there exists only a limited amount of human and non-human resources and due to which people can produce only a limited amount of economic goods. Therefore, it is not possible for every economy to produce various types of goods in unlimited quantity as the economy has limited resources only.
It is a fact that human wants are more than the supply or availability of resources. So, if human wants exceed the supply of resources, the scarcity problem would not be solved in society.
Since the resources available to satisfy people’s wants are limited in supply, so people cannot fulfill all their wants and they must make choice. It means people must economize the resources. That is every economy must make decisions about the best use of available resources in the consumption of various goods and services. So, preferring the most satisfying alternative amongst available is known as choice.
The problem of choice creates economic problems in every economy. Scarcity and alternative use of resources create the problem of choice regarding the use of resources. Thus, scarcity and choice are key facts of economic life.
Scarcity tells the story of human misery and unhappiness around the earth. So, scarcity depicts the value of goods. The problems of scarcity emerge among poor people as well as rich people, among developed countries as well as underdeveloped countries. It applies to everyone and every nation as there will never be enough of everything that we people want to have.
Scarcity gives birth to the choice or to the problem of choice. The limitation of resources forces economic participants to choose. For an individual, scarcity pushes his/her to choose only those goods which give more satisfaction. The producer is always in the compulsion to choose to produce higher profit ensuring products.
The problem of scarcity and choice for economic agents applies in the following ways.
Consumers: Due to scarcity they always must choose those goods which give them the most utility.
Producer: Producers due to limited budget need to choose those products which give them maximum profit.
Government: The government also faces the limitation of resources and it must choose those programs and projects which maximize people’s welfare.
Humans have unlimited wants. All the means are scarce in relation to human wants. Scarce resources have alternative uses. People always attempt to exploit these scarce resources for maximum/optimum satisfaction. They are always focused on utilizing more resources for maximization/optimization goals. This idea/behavior/fact gives birth to economic problems. Alternative use of scarce resources creates problems of choice. Thus, scarcity and choice or selection are the major economic issues and economics aims to solve such problems faced by its entities.