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Concepts of Scarcity and Economic Problem
According to the Cambridge English Dictionary, scarcity is the lack of certain resources, making it hard to achieve. In the context of economics, the lack of resources leads to the inability to meet the demands of the market. The reason scarcity exists in the first place is due to the consumption of the resource itself. The usage of the resources eventually leads to a shortage of resources. The higher the consumption, the faster the supply runs out, causing demand-induced scarcity.
Scarcity of water due to the increase of water consumption by 40% and the lack of water to satisfy the needs of people.
Scarcity of food. This happens because food consumption is expected to increase by 35%, but because food is a limited resource and there is not enough food to satisfy all the constantly increasing population’s demands.
The scarcity of energy is the lack of electricity to support the expanding network infrastructure of the growing population. In an age where technology is present in daily life, electricity becomes a vital source of energy in order to uphold a nation to a standard of living.
Describe the nature of the basic economic problem through the perspective of the growing middle class. [5 marks]
The basic economic problem exists because, although the needs and wants of people are endless, the resources available to satisfy needs and wants are limited. This problem gets major part due to the growing population of the middle class, as the increased number of people leads to an increased number of needs and wants, thus making the limited resources deplete at a faster rate.
The economic problem occurs when the demand for resources grows. Free-trade pacts, pro-open markets, pro-trade policies, and less global conflict are all vital principles that have led to a massive spike in economic growth, resulting in one of the fastest migrations out of poverty the world has ever seen. 5.3 billion people are expected to be part of the global middle class, which means 2 billion more new entrants. This number will be rising throughout the years as the population of developing countries is growing at a constant rate. The rapid increase in the number of adolescents means that the increasing demand cannot be met using the limited resources available, leading to scarcity. For example, over the course of 11 years: food consumption is expected to increase by 35%, water by 40%, and energy by 50%.
Therefore, the basic economic problem refers to the problem of economizing scarce resources or making the best use of those limited resources to satisfy the needs and wants of the increasing population.
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