Scarcity, Choice and Resource Allocation
Economics is a subject that people must confront in their everyday lives. People already spend a
great deal of their time thinking about economic issues such as: prices, buying decisions, use of
their time, to name a few. The word “economics” comes from the Greek word oikonomikos
meaning “one who manages a household.”
What is Economics?
The fundamental economic problem is: the scarcity of all resources both renewable and non-
renewable. Scarcity is the condition where the wants of individuals and societies are greater than
the limited resources available to satisfy them.
The science of how individuals and societies deal with the fact that wants
are greater than the limited resources available to satisfy those wants.
Resources are the elements which an individual, organization, company or country use to
provide for their wants and needs, normally categorized as:
Natural resources or endowments
, that is those elements in our environment which we
human beings are endowed with and which we make use of, but whose creation did not involve
any effort on our part.
, which refers to the capabilities that we have, both mental and physical.
Manufactured aids to production
, such as tools, machinery and buildings.
Economists also refer to these resources as
factors of production: land, labour
Often, when this term is used as one of the factors of production, it encompasses not only
land but all the other natural resources: air, sea, trees, minerals and so on. Given this wide scope,
some economists prefer to retain the broader term
This term carries the same meaning as human resources, as described above. It is
important to note that its use covers both the physical and mental, unlike its usage in everyday
speech, where labour is normally associated with physical activity.
This term refers to the stock of material assets that are produced and accumulated by a
society to facilitate further production. It can also be described as anything that is produced, to be
used subsequently for the production of goods and services.