Scarcity is an economic problem that usually comes up due to having limited resources but the wants are unlimited. Because of this scarcity, people are usually forced to incur opportunity cost. This is the cost of forgoing an alternative action so as to follow a certain action. Scarcity leads to the need for trade-offs and this in return results to opportunity cost. Any decision that people make involving choosing between two options or even more consists of an opportunity cost.
Due to scarcity, whenever a person makes a choice, they have to pass up some other opportunity (McEachern, 2008)Scarcity can also imply that one has nothing that they consider better to do. Therefore, this results to opportunity cost. It means that due to the lack of a better opportunity, people will do what they do. Thus, they will choose what at the specific time seems preferable. The economy also results to increase in opportunity cost. This is because, it will produce one good in large numbers than the other and this means less availability of some goods.
This can be seen and trade off and it shows that there will be increased opportunity cost. This is because people will have to choose a good based on its availability but not their need for it.Scarcity also leads to a command of goods in the market. A good is priced depending on its scarcity or availability in the market in comparison to other goods. This pricing would thus mean more involvement in terms of resources for the consumer (McEachern, 2008). Further, it may be something that not all people will be able to afford despite its necessity in their lives. Because of this, the consumer may be forced to take an alternative action and get the alternative good.
Time leads to people incurring opportunity costs. Because of the time that is required to make something available, its scarcity increases. According to growth economists, everything can not be achieved instantaneously. Investment requires waiting time. This then implies that an opportunity cost is incurred. The opportunity cost incurred in making an investment is the fact that the present consumption is forgone. Further, for the investment to mature, the scarcity of the goods being invested on will result to people or societies taking alternative actions. The growth of an investment also implies taking opportunity cost.
For instance, the growth may be fast, but not big. Thus, there will be scarcity of goods.Due to scarcity, people lack choices. For instance, someone may want a car, pollution free environment, a home. However, with limited resources it becomes difficult to produce the goods and offer all the services that people want. Therefore, this means that the people would not have many choices to make. This then implies that they will have to settle for the available services and goods even if they are not what satisfies their wants.Human beings are dynamic. Through their imagination, humans continuously make discoveries of new wants (Czeglédi & Kapás, 2009). Therefore, they have to find new resources that can be used in the satisfaction of these discovered wants. It is the need for these new wants that will lead to opportunity costs. For instance, if the resources are not available to satisfy the discovered wants, they will have to settle for alternatives. This applies though these may not be the alternatives that satisfy their wants. Therefore, opportunity costs are constantly changing.
Czeglédi, P. & Kapás, J. (2009). Economic freedom and development. Akad. K. publishers.
McEachern, W.A. (2008). Economics: A Contemporary Introduction. 8th Ed. USA: Cengage Learning publishers.