- Define and explain What Is Scarcity? in your own words
- Use key terms such as scarcity accurately
- Apply what you have learned to new examples and questions
- Avoid the common mistakes learners make with this topic
This lesson focuses on What Is Scarcity?: discover why nobody can have everything they want, no matter how rich they are.
Discover why nobody can have everything they want, no matter how rich they are.
Key ideas
The basic economic problem
People have unlimited wants but limited resources. Even the richest person cannot have everything, because time, money and raw materials are all limited. This mismatch between wants and resources is called scarcity, and it is the starting point of all economics.
Wise spending and saving
Money you save today can be spent later, while money spent is gone. Wise spenders compare needs and wants before buying, wait before buying expensive wants, and keep some money aside for the future.
Key term — scarcity: The basic economic problem: there are not enough resources — money, time, materials — to satisfy everyone's wants, so choices must always be made.
Ali has £10 of birthday money. He needs a new water bottle for school (£6) and wants a comic book (£5). Use opportunity cost to decide.
List Ali's needs: the water bottle is a need because he uses it every day at school. List Ali's wants: the comic is a want — nice to have, but he can live without it. Add the costs: £6 + £5 = £11, which is more than the £10 available — scarcity strikes. Apply opportunity cost: buying the bottle means giving up the comic; buying the comic still leaves him unable to afford the bottle. Decide: buy the bottle (£6), save the remaining £4 towards the comic later — needs come first.
Answer: Ali cannot afford both because of scarcity. The opportunity cost of buying the water bottle is the comic book he gives up, so the wise choice is to buy the need first and save the rest.
- Thinking wants are needs A games console is a want, not a need — you can live without it, even if everyone else has one.
- Believing money solves scarcity Even billionaires face scarcity: time is limited, so choosing one project means giving up another.
Practice
A warm coat — it protects you from the cold; the others are wants.
No — together they cost £9, which is more than £8. Scarcity means she must choose.
Because as soon as one want is satisfied, new ones appear — there is always something else people would like.
The ice cream — it is the next-best thing she gives up by choosing the book.
Quick check
Which of these best defines "scarcity"?
Tom saves £2 of his £5 pocket money each week. Give one reason saving is sensible.
Name one scarce resource other than money.
- What Is Scarcity?: discover why nobody can have everything they want, no matter how rich they are.
- The basic economic problem: People have unlimited wants but limited resources.
- want: Something you would like to have but can live without, such as a new toy or a holiday.
- Watch out for: thinking wants are needs