Question

“In a 250 words post, give an example of something that is scarce in your life and explain the choices you've made because of scarcity” be sure to support your statements with logic and arguments.

Answer 1

The scarcity of resources arises when the available amount of resources is not enough to fulfill the wants of all the people in the economy. There are many places in the world where clean drinking water is scarce. There is a very less supply of water in the localities. People need to cover a long distance in search of clean water. The water is supplied by water tanks to the localities because of the absence of piped water supply. Since water is a necessity and there is no perfect substitute for it, people usually save that scarce water for drinking purposes. Very low-income grouped individuals live in these types of places and their houses are often very weak so there is a lack of piped water supply in the houses of people. These individuals travel a long way for water and make very judicious use of water. When scarcity and need occur at the same moment then there are very few choices to make and the most appropriate is to use the scarce resource wisely. So, the lack of a proper supply of water makes people understand the meaning of scarcity.

Answer 2

Scarcity of resources occurs when what is available is not sufficient to provision the first best outcome given preference. Money (M) is very scare in my life because I am a new earner. The scarcity of money places a binding constraint on the choices are that are available in exchange of money. Main choices that I make pertains to consumption (C=Food, Rent, Travel, Miscellaneous) and Savings (S). Thus the choices are bound by the constraint are defined such that C+S = M. So lately I was deciding on buy an SUV Car. But given the constraints and scarcity on the Money, I could only afford a sedan. My choice of the car was constrained by what I have in savings and what the instalment I could afford. Thus the scarcity of money interfered with my choices and restricted my choices thus indirectly affected my welfare indicators. Thus scarcity of money reduced my welfare. Also during the recent vacation, I was planning to travel to a holiday destination. There are two main dimensions while deciding on the travel plan: duration and destination. So given the scarcity of Money, both duration and destination were sub-optimally selected. Besides the travel was made on an economy ticket and not on business. This shows how scarcity of resources results in the sub-optimal choices and resulted in lower welfare for me had there been no scarcity of Money.