Microeconomics/Goods and Scarcity
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[edit] Goods
In economics, objects people want are called goods (tangible) or services (intangible). Goods exist or are created through value addition, and can be bought and sold at a price; this includes such things as foods, animals, computers, and jewelry. Even services, which are things people can either do or have done, are a type of good. A service might be someone vacuuming a room, or driving you to the airport.
Goods are usually classified into two groups. Some goods, such as food, and clothing, are things everyone needs. They are called necessities. Other goods, such as jewelry and stereo systems, are luxuries, meaning that a person may want them very badly, but can live and function without them.
[edit] Scarcity
People have numerous wants & desires but the resources to fulfill these wants and desires are limited, this gap between the desires and resources creates scarcity. It is important to understand that goods and services are limited; there is a finite amount of resources in the world. Of course, since there is a limited amount of goods, there may be a problem if people want more of a good than there is. If there is less of a good than people want of that particular good, it is scarce. If you would eat more ice cream than you currently do if it were free, it is scarce. Some goods are not scarce; if no more of a good would be consumed if it were free, it is abundant/free good. This means there is enough, or more than enough, of the good in question.
Scarcity is sometimes referred to as the fundamental fact of economics. There are not enough goods to fulfill all of the wants that people have. This has been true in the past, and it seems that it will remain true for the foreseeable future. This means that there is some way to partition the goods among the people who want them. In some cultures, this is decided by a market pricing system, where the most serious customers are matched with the best suppliers and in others it is determined by some other system, such as everyone getting an equal share regardless of needs, desires or utility.
[edit] Review Questions
- Name 3 luxuries you own.
- Name 3 necessities you own.
- Is air a good, or not? Explain.
- Can something be a necessity for one person, but a luxury for another? Explain why or why not.
- What is more scarce, diamonds or wheat? How do you know?
- In what way are goods distributed in modern society?
