Scarcity, Choice, and Opportunity Cost: Understanding Key Economics Concepts

Scarcity is central in economics and does influence choice and opportunity. Scarcity refers to the experience of an individual being unable to access every good and service they want. In an economy, scarcity tends to exist because the human need for goods and services tends to exceed the quantity of production of the goods and services (Hamilton et al., 2019). Scarcity thus generates choice, which involves individuals trading off the expected value of a given opportunity cost against the expected value of its best alternative. Therefore, scarcity results in choice, leading to opportunity cost.

Yes, affluent people, businesses or countries experience the problem of scarcity. The reason is scarcity is ubiquity since human wants are unlimited. Affluent individuals experience scarcity in instances they are unable to buy more than they want, when they cannot be in two places at the same time, and when they are forced to choose between alternatives (Hamilton et al., 2019). Thus, scarcity will exist even in countries with vast resources.

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I am impacted by scarcity by the increased cost of goods and products in the market. The fuel cost went up after the war in Ukraine, which made it challenging to access fuel, which was also selling at higher prices. The cost of goods in the market has also increased, influencing my purchasing power, as I have to buy products that I can only afford. For instance, the cost of eggs has made it impossible for me to prioritize them over groceries.

An opportunity cost I am currently faced with at home is the amount spent on eggs. I am currently forced to prioritize buying milk over eggs. The increased price of both products over the previous months has resulted in me choosing milk over eggs during shopping.

References

Hamilton, R., Thompson, D., Bone, S., Chaplin, L. N., Griskevicius, V., Goldsmith, K., … & Zhu, M. (2019). The effects of scarcity on consumer decision journeys. Journal of the Academy of Marketing Science, 47(3), 532-550.