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Understanding Scarcity:

The Basic Economic Problem

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The Chair Dilemma

  • Imagine: 16 students, only 6 chairs in class
  • Teacher says you must figure it out
  • How would you handle this situation?
  • This scenario introduces the concept of scarcity

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What is Scarcity?

  • Scarcity: The basic economic problem
  • Occurs when a resource is limited in supply and in demand
  • Not all resources are scarce (e.g. air)
  • Scarce resources: Limited supply, high demand
  • Question: Can you think of other scarce resources in your daily life?

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Why Does Scarcity Matter?

  • Scarcity necessitates choices
  • We must decide how to allocate limited resources
  • Affects individuals, businesses, and societies
  • Creates the need for economic systems
  • Question: How do you make choices when faced with scarcity?

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Allocation Systems

  • First come, first served
  • Seniority (oldest first)
  • Merit-based (highest grades)
  • Lottery system
  • Auction system
  • Which system do you think is fairest? Why?

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Scarcity in the Real World

  • Natural resources (water, oil, minerals)
  • Labor (skilled and unskilled workers)
  • Time (24 hours in a day)
  • Money (personal and national budgets)
  • Can you identify scarcity in your community?

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The Role of Economics

  • Economics studies allocation of scarce resources
  • Helps society deal with scarcity
  • Aims for efficient and equitable distribution
  • Develops systems to manage competing wants and needs
  • How might studying economics help you in the future?

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Economic Systems

  • Different ways to allocate scarce resources
  • Examples: market economy, command economy, mixed economy
  • Each system has its own approach to scarcity
  • Influences who gets what and how much
  • What type of economic system do we have in our country?

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Scarcity and Prices

  • Scarcity often leads to higher prices
  • Price acts as a way to allocate scarce resources
  • Example: rare baseball cards, limited edition sneakers
  • Can you think of something expensive due to its scarcity?

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Making Choices with Scarcity

  • Opportunity cost: what you give up when making a choice
  • Trade-offs: weighing pros and cons of different options
  • Prioritizing needs vs. wants
  • Developing decision-making skills
  • How do you make choices when resources are limited?

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Conclusion: The Ongoing Challenge

  • Scarcity is a fundamental economic problem
  • Affects individuals, communities, and nations
  • Understanding scarcity helps make better decisions
  • Economics provides tools to manage scarce resources
  • How will you approach scarcity in your own life?