Unit 4 scarcity and choice

Lead-in

Working in a group, try to identify the term ‘scarcity’ and answer the following questions.

1. Why does scarcity exist?

2. How do individuals, communities and countries attempt to solve the problem of scarcity?

Key Vocabulary

Make sure you know the following words and word-combinations.

1. satisfy v	удовлетворять
2. face v	сталкиваться с
3. land n	земля, земельные угодья
4. labour n	труд, рабочая сила
5. capital n	капитал
6 insufficient adj	недостаточный
7. exist v	существовать
8. economic activity	экономическая деятельность
9. benefit n	польза, прибыль
10. forgo v	отказываться, воздерживаться от чего-либо
11. opportunity costs	альтернативные издержки; издержки неиспользованных возможностей
12. evaluate v	оценивать
13. non-monetary adj	неденежный

Pre-reading Activities

1. Consult a dictionary and find in the columns groups of synonyms and antonyms.

Match synonyms:
desire n	profit n
forgo v	select v
benefit n	give up v
choose v	want n

Match antonyms:
balance n	abundance n
scarcity n	non-monetary adj
monetary adj	unlimited adj
limited adj	imbalance n

2. Translate in writing the following paragraph.

Scarcity is the fundamental economic problem: humans have unlimited wants and needs in a world of limited resources. It states that society has insufficient productive resources to satisfy all human wants and needs. Goods (and services) that are scarce are called economic goods (or simply goods). Other goods are called free goods if they are desired but in such abundance that they are not scarce, such as air and seawater.

Reading

Read the text and explain what the terms “scarcity” and “opportunity cost” mean.

Scarcity is the fundamental economic problem. Not all human needs and wants can be satisfied, scarcity limits us both as individuals and as a society. As individuals, we face scarcity of time and ability. As a society, our resources, land, labor, and capital, are insufficient to produce all the goods and services we might desire.

So, scarcity is the condition of not being able to have all of the goods and services a person wants. It exists because a society can only produce limited amounts of goods and services with the limited resources. The resources, however, have alternative uses and can be combined in various proportions. With the alternative use of scarce resources, choices must be made.

People must choose how to use scarce resources and which of their desires they will satisfy and which they will leave unsatisfied. When we, either as individuals or as a society, choose more of something, scarcity forces us to take less of something else.

Economics is sometimes called the study of scarcity because economic activity would not exist if scarcity did not force people to make choices. The fact that choices must be made reflects the fact that scarcity exists.

Scarcity is an imbalance between what is wanted and the amount that is freely available. Choice, in economic terms, is rational choice and is defined as an act of making calculated, self-interested decisions. Basically, this type of choice is about choosing what will cost the least and have the highest benefit.

In making a choice, some alternatives are forgone. Economists use the term ‘opportunity cost’ to mean the cost of a specific choice measured in terms of the next best alternative choice. In other words, it is what the decision-maker must forgo in order to make the choice that is finally made. Another term for opportunity cost is “real cost”. Opportunity cost is useful when evaluating the cost and benefit of choices. It is often expressed in non-monetary terms.

Comprehension Check

1. Answer the questions.

1. Why are scarcity and choice basic problems of economics?

2. What is scarcity? Give different definitions.

3. Why must people make choices?

4. What is choice?

5. What do economists mean when they use the term ‘opportunity cost’?

6. In what way is opportunity cost expressed?

2. Are these statements True or False? Prove your decision.

1. Human needs and wants can’t be satisfied.

2. Scarcity exists because society can produce limited amounts of goods and services with insufficient resources.

3. Scarcity forces us to forgo some alternatives.

4. Economics is sometimes called the study of choice.

5. ‘Opportunity cost’ is what the decision-maker must forgo in order to make the choice that is finally made.

6. Opportunity cost is the fundamental economic problem.

3. Reproduce the context in which the following word-combinations are used.

to satisfy needs and wants

to produce goods and services

economic activity

scarce resources

to forgo alternatives

to evaluate the cost and benefit