What Is Scarcity?
Scarcity is the economic concept of there being finite resources in the world. The study of economics is the study of resources that are scarce. If scarcity was not a problem and the world was filled with a limitless supply of everything people would not be forced to make trade-offs of their needs and wants. You make choices between different items because the resources that are necessary are limited. Scarcity is a basic economic concept that lies at the core of economics.
Economic Goods vs. Free Goods
Any good or service that is scarce is called an economic good, other goods that are not scarce are called free goods. Free goods are in such a large abundance that they are not considered scarce. An example of a scarce good is air, air is in such a great abundance in our world that we do not have to worry about it's scarcity and make a trade-off based on the amount of air that you require.
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What Kinds of Good's Are Scarce?
Physical goods are most likely to remain scarce, an example of a physical good is iron. There is fixed amount of iron in the world. Some non-physical goods are designed to be scarce as well. Positional goods are an example of a non-physical good that is scarce. Examples of positional goods are certain awards, fame, and membership of groups that are considered "elite". These positional goods get all of their meaning from society and are considered scarce because of their value.
The Importance Of Scarcity
Economics is a social science that looks at how individuals, governments, and firms make choices on allocating scarce resources in order to satisfy their desires. Scarcity lies at the very heart of economics, if all goods and services were in a great abundance and not considered scarce their would be no economy because people would not have to make trade-offs when deciding between two different items.