it’s all about resources and wants! scarcity. the problem limited resources insufficient to...

It’s all about resources and wants!

Scarcity

The Problem

Limited Resources Insufficient to Fulfill our

Wants

The Goal

Increase Individual and Societal Welfare

Welfare

Subjective Evaluation of Individual and Societal Well Being

“How YOU doin’?”

09/29/09 Lesson 1: Scarcity 5

Individual Goals: What We Want

• Health• Friends and Family• Career• Peace• Love• Stuff


Social Goals: What We Want

1. More and better education2. A cleaner environment3. More and better health care4. Greater public safety5. Less stress 6. Preservation of non-renewable

resources including natural resources 7. Elimination of poverty

The Question

Given limited resources, how do we best use them to maximize people’s welfare?


RESOURCES: HUMAN CAPITAL

Knowledge and skills of the workforceKnowledge and skills of the workforce

Your job in school is to develop your human capital. Your job in school is to develop your human capital.

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RESOURCES : PHYSICAL CAPITAL

Goods produced for the purpose Goods produced for the purpose

of producing something elseof producing something else


Natural Resources

“Gifts of Nature”


EntrepreneurshipCombines other resources, takes a risk, seeks a profit

Famous Amos

http://www.microsoft.com/presspass/images/gallery/execs/web/gates-2.jpg


Money is not a resource


Time is not a resource


Resources• Human Capital• Entrepreneurship• Physical Capital • Land – Natural Resource

• Not Money• Not Time

A nation’s wealth is determined by the

quantity and quality of its physical and human resources and the political and social

infrastructure.


SCARCITYYOU CAN’T HAVE EVERYTHING YOU WANT!

The inability of The inability of limited limited resourcesresources to satisfy people’s to satisfy people’s wantswants

Scarcity

It’s about RESOURCES and WANTS.


Which people face scarcity?

a. Poor b.Rich c. Selfish d.Selfless


Scarcity is pervasive• Rich Athlete• Donald Trump• Joe Schmoe• Dr. Charkins• The President• Your parents

You can’t eliminate scarcity

But you can learn to deal with it!


The test of scarcity• It has to be allocated.• It has a positive price. • It has an alternative use.• People who want it have to give

something up to obtain it.• A choice has to be made


Some things that are scarce

• Pencils• Yachts• Steaks• Movies• Economists• Dentists• Refuse collectors

• Paper clips• Automobiles• Teachers• Shoes• Compact Disks• Computers• Computer

programmers


Some things that are not scarce

• Air

• Snow in some parts of the country

• Garbage

• Pollution

• Dirt

• Used gum• Pine cones in

Wrightwood• Sand at the beach• Cowrie shells in

Mombassa• Drunk drivers


Scarcity is the Villain!!!!!!


Why do .......• some very good

students get mediocre grades?

• hospitals turn pregnant women away?

• servers give less than perfect service?

• colleges turn students away?

• colleges have large classes?

• colleges offer so few courses?

• some parents spend little time with their children?


Why don’t.......• we provide organ

transplants for all who want them?

• we prevent death from dirty air?

• we educate all young children in their native language?

• you study 24 hours a day?

• you spend 24 hours a day with your loved one(s)?

• you sleep more?


Who is the villain when:• You don’t get the service you want at

a restaurant?• You don’t get the service you want

from the registrar?• You are put on hold by the

secretary?• You don’t get tickets to the concert?


Your reaction to scarcity• Yell, scream, whine, moan, whimper

• Accept scarcity and see if there is anything you can do to remedy or improve the situation

scarcity is the villain, not the decision-maker.

When choices have to be made,


Attempts to avoid or ignore scarcity don’t

work.• I’ll put it on the credit card.• I’ll get up early to study.• Let’s get an apartment.• I need a new car; I can get a loan.• Let’s go to Vegas.

Scarcity: The Problem Restated

The inability of limited resources to fulfill society’s wants.


Scarcity is not:• Poverty

– all poor face scarcity– all who face scarcity are not poor

• Rareness– a rare tropical disease

• Doesn’t address needs– wants, not needs


The Goal of Economic Analysis

• Greater “wealth” for individuals and society

• Wealth is the subjective evaluation by individuals of their well being.

The Question

Given limited resources, how do we best use them to maximize people’s welfare?


Main Points• Resources are limited• Land, human capital, physical capital, and

entrepreneurship are resources; time and money are not.

• Scarcity is the inability of our limited resources to satisfy our wants.

• Wealth is the subjective evaluation of well being.

• The goal of economic analysis is to increase individual and societal wealth.

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