![]() ![]() For whom should goods and services be produced? If a good or service is produced, a decision must be made about who will get it.Should a firm employ a few skilled or a lot of unskilled workers? Should it produce in its own country or should it use foreign plants? Should manufacturing firms use new or recycled raw materials to make their products? How should goods and services be produced? There are all sorts of choices to be made in determining how goods and services should be produced.Every society must decide what it will produce with its scarce resources. A decision to preserve a wilderness area requires giving up other uses of the land. Producing better education, for example, may require cutting back on other services, such as health care. What should be produced? Using the economy’s scarce resources to produce one thing requires giving up another.Every economy must answer the following questions: The choices we confront as a result of scarcity raise three sets of issues. Scarcity and the Fundamental Economic Questions Consequently, the scope of economics is wide indeed. Scarcity characterizes virtually everything. Space will surely become more scarce as we find new ways to use it. Thus, even parts of outer space are scarce. Conflicts have already arisen over the allocation of orbital slots for communications satellites. But now, our use of space has reached the point where one use can be an alternative to another. Outer space, for example, was a free good when the only use we made of it was to gaze at it. The fact that gravity is holding you to the earth does not mean that your neighbor is forced to drift up into space! One person’s use of gravity is not an alternative to another person’s use. A free good is one for which the choice of one use does not require that we give up another. Not all goods, however, confront us with such choices. Air is a scarce good because it has alternative uses. If we decide we want to breathe cleaner air, we must limit the activities that generate pollution. The more garbage we dump in the air, the less desirable-and healthy-it will be to breathe. Those two uses are clearly alternatives to each other. But just as certainly, we choose to dump garbage in it. ![]() In effect, one use of the air is as a garbage dump. We pollute it when we drive our cars, heat our houses, or operate our factories. What uses can we make of the air? We breathe it. The test of whether air is scarce is whether it has alternative uses. Consider the air we breathe, which is available in huge quantity at no charge to us. The fact that land is scarce means that society must make choices concerning its use. There are alternative uses of the land both in the sense of the type of use and also in the sense of who gets to use it. Who should live in the house? If the Lees live in it, the Nguyens cannot. Should it be a large and expensive house or several modest ones? Suppose it is to be a large and expensive house. Suppose we have decided the land should be used for housing. We could leave the land undeveloped in order to be able to make a decision later as to how it should be used. The parcel presents us with several alternative uses. A scarce good is one for which the choice of one alternative requires that another be given up.Ĭonsider a parcel of land. Scarcity is the condition of having to choose among alternatives. Our unlimited wants are continually colliding with the limits of our resources, forcing us to pick some activities and to reject others. Whether we like it or not, we must make choices. To say yes to one thing requires that we say no to another. ![]() Because our resources are limited, we cannot say yes to everything. If our resources were also unlimited, we could say yes to each of our wants-and there would be no economics. We would always like more and better housing, more and better education-more and better of practically everything. But our wants, our desires for the things that we can produce with those resources, are unlimited. At any one time, we have only so much land, so many factories, so much oil, so many people. ![]()
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