Today, we want to talk about scarcity, which is a fundamental thing in economics. And one of the easiest ways to understand scarcity is to think of something that is not scarce, something that you can have, as much as you want, whenever you want, for free.
Things that may come to mind are perhaps, air, or maybe sunlight. Something like that, but there are pretty few, if you think about it. Like households have a water bill, so they gotta to pay for the water.
If you go to the beach, you might take a bucket of sand, but you can't take as much as you want, whenever you want, for free. That might cause erosion, so they wouldn't like it if you took the whole beach.
So, what we're going to do today is to do an activity designed to give you a sense of scarcity, and we're going to look at it, not from a household point of view, but from a firm point of view. A firm, which makes things, also faces scarcity. It has to get labor. It has to get resources, put them together, and make a good or service.
So, in order to do that, we're going to turn you into little firms. You're going to be a labor person working, and making something. And, I ask you to get out a piece of paper, because we're going to have two scarce resources: labor and paper.
And, each of those are scarce, so you can't have as much as you want, whenever you want, for free. And so, you're going to be a firm. You're going to be making something, and as you make something, I'm going to count who is making what, and we're going to draw a picture of that. And so, you can think of this activity as drawing a picture of scarcity.
And, we all know that a picture is worth a thousand words, so, that's going to, hopefully, help you understand this fundamental economic concept of scarcity better. Scarcity, remember, is what economics is really all about; the allocation of these scarce resources.
So, we can give you a picture of that, you're going to understand, and, hopefully, take that with you. As you do this activity, remember, we're trying to simplify something, so we're going to look at a very simple type of economy, with only you and a piece of paper, and you're going to be making one of two things: a paper fan, or a paper airplane.
So, we're just going to take a number line that we had, from way back, from elementary school, and start here, at zero, and go on out, here, to ten of you, and, that would represent a picture of the fans sector of our economy. And, we have six of you.
I'm going to put you on a number line, but I'm going to make it vertical, so that I don't get on top of the fan number line.
And, I'm going to have planes, here. So, this number line would represent the airplanes sector of the economy. So, if we combine those here at point A, that would represent a picture of everybody, because that would include all the fans and all the airplanes.
So, this point represents, now, the whole class, and the little economy that we have here. Since all of you participated, and all the paper was used, we call "A" efficient, which means that the scarce resources, you and the paper, are being fully utilized to make the most that you can, either a plane or a fan.
So, this is going to be one point on our production possibility frontier. Another possibility, that we have, is up here, where all of you might have chosen to make airplanes. That could have happened. It didn't, but it's a possibility.
That's another place where the whole economy might be, only making airplanes.
And, another place would be down here - 16 fans. And, we're going to connect these dots, and that will give us our production possibility frontier. And we have now, our picture of scarcity, because we can't make 16 planes, and 16 fans way out here. We don't have enough students or paper to do that.
So, we have a picture here, of scarcity, allocating paper and you, between two things, fans and airplanes. So, we have the scarce allocation of resources. That's what economics is all about.
Comments are closed.