Scarcity and choice

What is the fundamental economic problem and what is its consequence?

Unlimited wants of people, but limited resources.

→ we need to make choices because we cannot have all our wishes fulfilled.

What’s the purpose of economics?

• study how people use scarce resources to satisfy their unlimited wants

→ Wissenschaft, die menschliches Verhalten untersucht: wie Menschen ihre Ziele erreichen, trotz, dass sie knappe Mittel zur Verfügung haben.

What is scarcity?

= When there’s not enough of sth to meet everyone’s wants

• scarce goods → everything that has a price

• economic goods → everyting you can charge money for

What does “at a zero price” mean?

• for free

• if sth is non-scarce (there’s enough to meet everyone’s wants)

• you cannot charge money for it

• free goods

What would be a way to allocate (distribute, sell) a product?

• give it a price tag

• those who are serious about acquiring it will pay the price

What’s the problem with this method?

• wealthy people can get the goods they want

• less well-off people cannot get the goods they want

  → Capitalism

Why do people doubt that breathable air is a free good?

• sometimes you can even charge money fo air (diving, hospital)

• air, sunlight (not always there)

• water (dirty water most of time free)

• internet, software, inventions (it’s there and free but access is charged)

How do people make choices?

• they make choices that are in their own interest (rational self interest principle)

• weigh up pros and cons (benefits and costs) to make a rational choice

• rational choices are different for everyone