<Standard E.1.1 .......................................................................................................................................................Standard E.1.3>

Explain how consumers and producers confront the condition of scarcity, by making choices that involve opportunity costs and trade offs.

A graph showing the average prices of gasoline in the US between 1974 and 2004
A graph showing the average prices of gasoline in the US between 1974 and 2004


Scarcity means that people cannot obtain as much of something as they want, without making a sacrifice or bearing a cost.

Scarcity defines a relationship - between the amount of something we want and the amount that is available.
  • Producers face a limited amount of resources (raw materials, human capital, etc), and therefore are only able to generate a limited amount of output.
    • Consumers must then ration their own resources to determine, essentially, how to maximize their utility.
  • This is where the concept of trade-offs comes into play.
    • Consumers must establish their opportunity costs in determining which goods and services generate the most utility, given a scarce amount of resources some of which they must give up.
  • Ultimately, scarcity determines supply, demand and equilibrium. For producers, scarcity determines what the right amount of output should be to maximize profit.
    • For consumers, scarcity determines how much of limited resources they must give up (or opportunity costs they are sacrificing) to maximize their utility.

Multimedia.pngClick here for a short, five minute video that clearly explains scarcity in relation to consumers in economics.

Screen Shot 2016-01-04 at 11.31.08 AM.pngActivity to show scarcity/lesson plan click here

Environmental Scarcity article click here

US petroleum production & imports, 1920--2005
US petroleum production & imports, 1920--2005

Example: Oil

See Special Topic Page on Oil in Central Asia

Oil exists in a limited supply in the world. The limited amount determines the supply and opportunity cost. People must ration out the utility of the oil to maintain an equilibrium in the market.

Where Does America Get Oil? You May Be Surprised from NPR (April 12, 2012).


Example: Water
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Water Scarcity Threats from World Wildlife Fund

5 Ways to Teach Students About the California Drought



Case Study by the UN click here
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Resources:
http://www.socialstudiesforkids.com/articles/economics/scarcityandchoices1.htm
http://www.econlib.org/library/Topics/HighSchool/Scarcity.html