Scarcity, Opportunity Cost and Shortage
Scarcity is essentially the economic contradiction of our desire as humans to
want to posses everything and the limited resources available to everyone. This
economic problem forces people to have to make decisions as to how to best
distribute resources so that people’s needs are met, and some wants can be
fullled. This is where opportunity cost comes in—nothing in this world is free.
Opportunity cost is when a choice is made there is a loss of a potential gain. If you
choose one thing over another you are sacricing your ability to obtain or do one
thing in pursuit of another – like the choices people make in obtaining or creating a
good, service or resource.
So, scarcity dictates that there are limited resources available to us and
opportunity cost is how we choose to spend our resources to obtain or produce a
good service or resource. Due to scarcity we must have opportunity costs. A
shortage, on the other hand is when there is not enough of a particular good,
service or resource within a given market. Scarcity is a natural occurring reality of
life and shortage is a market induced problem.
Humans cannot posses everything they want because there are simply not
enough resources in the world to go around, that is scarcity. If every person could
make an innite list of everything they need and want the world would quickly start
running of certain resources, that is shortage.
There are all di&erent types of resources on earth, however, there are