Scarcity Video 1 - Defining and Explaining Scarcity

This video is Part 1 of a 5 part series which explores the economic concept ‘scarcity’. Part 1 of this series focuses on defining and explaining scarcity.

Definition of Scarcity

Scarcity can be defined as too many people chasing too few goods and services. There are insufficient resources to cater for all the needs and wants of everyone.

Scarcity explained using examples

Scarcity is explained using a simple example of a small society consisting of 4 people. One person (Fred) has a banana that he wants to trade. The other 3 people want the banana but only one person can have it. These 3 people offer Fred various things to trade for the banana. Fred accepts what he believes to be his best offer (2 of 3 people that wanted the banana lose).

This video also briefly discuses and defines money. The example of scarcity is explained using money instead of barter trade.

In the presence of scarcity, those that own the scarce resource or have possession of the factors of production to produce or obtain the scarce resource benefit from scarcity. Those with limited wealth and no ownership of the means or factors of production are forced to compete to obtain the scarce resources. These people are hurt by scarcity.