Scarcity is the problem of infinite human wants and needs, in a world of finite resources. In other words, society does not have sufficient productive resources to fulfil those wants and needs. Scarcity limits us both individuals and as society. As individuals, limited income keeps us from doing and having what we might like. As society, limited resources such as manpower, machinery and natural resources, fix a maximum on the amount of goods and services that can be produced. Therefore, scarcity requires choice. People must choose which of their desires they will satisfy and which they will leave unsatisfied. When we, either as individuals or as a society, choose more of something, scarcity forces us to take less of something else. Like Thomas Sowell said ‘it is best: no solutions, only tradeoffs. To get the most out of life, to think like an economist, you have to know what you’re giving up in order to get something else.’ This is known as opportunity cost.
Opportunity cost is defined as the next best alternative forgone when an economic decision is made. In today’s world, every choice we make has a price. But the question is, are these choices wise and reasonable? How are these choices going to benefit us? Today in an extremely materialistic world, people seem to give up a lot to get something they want so that they can fit in into society. A teenage girl and boy would give up an entire monthly allowance so he or she can get their latest Xbox or the latest Louis Vuitton bag. The opportunity cost of their actions is the other ways in which they could have spent their money on wisely and usefully. The girl and boy could have saved an entire monthly allowance so he or she can buy books related to their studies. This would be a wise choice as it a lifelong investment as knowledge retrieved from books is priceless. But however, no one seems to be interested in wise investments in terms of their choices. Money is critically valuable, and we are giving up more than we know if we keep spending it unnecessarily.
In my opinion, understanding the concepts of economics is greatly vital for our lives. Many of us have a misperception about economics. All that comes to our minds when we think about economics is stock markets which are not what economics is about. We should not be naive about economics as after all it determines the choices and the decisions that we make, helps us to understand how the world works and also fulfil the needs and wants of humans.
- Geetha 5W
Very well written and articulated i must say. I agree with the statement that economics is "the study of how to get the most out of life". That statement really sums up the importance of economics and even to the common people in their everyday lives are using economics and its concepts. I guess that is why we are studying it and this level and more importantly the doors that economics studies can open up for us in our future studies.
ReplyDeleteA very fitting and real example of how we are living in a very materialistic world indeed. I agree that the opportunity cost of those materialistic goods are the books that we can buy to study which can be viewed as an investment if we look ahead as to how it can benefit us in our future. Materialistic wants are now, but books as investments stay with us in the long run. I think the opportunity cost can pose as a good reminder to us all as sometimes we all, especially myself, walk into a store and just buy something just cos it becomes a want at that second but I fail to consider the opportunity cost of getting that product which is a another I have forgone.
The points you state are stated very well, it is easily understood and the whole post is truly a joy to read as it does not drag on and gets points through very well.
Oh, I think we share the same sentiments, as I wrote on one of the comments on another blog. Do we really know if we are making the "correct" choices at any one time? And Amanda's point rings true too - are the decisions we make today that "feels right" now be as wise when we consider the long run?
ReplyDeleteThis is good stuff! Its is very different from the other works as she has a whole new point of view, it captures one's attention immediately.
ReplyDeleteI agree with how she commented that the society has become an "extremely materialistic world" but i do not agree with the part that the opportunity cost for goods & services is books & education. Different people would have different acknowledgment. Furthermore, I think it would be a greater success if you have brought in more examples to illustrate your points.
However all in all, it is a joy reading your post!
Emily Yiu.