What Is Economics
Macro and Microeconomics
Production Possibility Frontier (PPF)
Specialization and Comparative Advantage
Demand and Supply
The Law of Demand
The Law of Supply
Time and Supply
Supply and Demand Relationship
F. Shifts vs. Movement
The availability of substitutes
Income available to spend on the good
Income Elasticity of Demand
Scarcity, a concept we already implicitly discussed in the introduction to this tutorial, refers to the tension between our limited resources and our unlimited
wants and needs. For an individual, resources include time, money and skill. For
a country, limited resources include natural resources, capital, labor force and technology.
Because all of our resources are limited in comparison to all of our wants and needs, individuals and nations have to make decisions regarding what goods and services they can buy and which ones they must forgo. For example, if you
choose to buy one DVD as opposed to two video tapes, you must give up owning
a second movie of inferior technology in exchange for the higher quality of the
one DVD. Of course, each individual and nation will have different values, but by having different levels of (scarce) resources, people and nations each form some
of these values as a result of the particular scarcities with which they are faced.
So, because of scarcity, people and economies must make decisions over how
to allocate their resources. Economics, in turn, aims to study why we make these decisions and how we allocate our resources most efficiently.
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