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"Scarcity is the central economic problem in all societies, irrespective of the type of economic system." Discuss.

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Introduction

"Scarcity is the central economic problem in all societies, irrespective of the type of economic system." Discuss. Scarcity is the inability to satisfy all wants of due to a lack in resources or supply, where human want exceeds the output this can lead to something becoming scarce. Resources are the means which make a product; this can be natural resources such as land and raw materials, human resources, or manufactured resources such as factories and machines. The resources used for a product often determine the price; therefore if particular resource such as oil or a particular human skill involved are rare or in short supply this will add the value of the product. One of the main reasons of something becoming scarce is that it is humans have wants and needs that exceed in reality to what can be obtained. It is human nature to want more and more, people who are already rich want to be richer, often there is no limit to our wants and needs. ...read more.

Middle

In between both of those what is known as a mixed economy. In this type of economy, some decisions are made by the government but also by consumers and firms. There are many problems in each of these economic systems that are related to macroeconomics (business as a whole; such as inflations recession and unemployment) and microeconomics (individual parts of the economy; such as supply and demand and the individual firms and services). Each of these problems must be somehow overcome by the parties involves, a decision need to be made that suits that particular type of economic system. The main problem with a centralised economic system is that it is very hard to make justified decisions, due to this being centralised, the needs of the people may not be met. This would make it hard to react in changes in needs, which would slow the economy down. ...read more.

Conclusion

On the other hand, a supply side policy tries to alter the aggregate supply. The government makes these alterations in order to improve or maintain the level of the economy. However, this can be difficult for firms that run under a mixed or free economy, as these decisions ultimately affect the output of a business predictions need to be made about how to run the business. If these decisions are not properly approached, or firms make a poor decision then firms may face microeconomic problems which can lead to scarcity. Similarly is a government makes a poor decision on how to balance the economy, this will affect the entire economy of the country which can lead to more severe form of scarcity. There are two main factors that cause scarcity, unlimited human wants exceeding the output, and factors related to macroeconomics. In order to combat scarcity society has to look closely how to deal with these issues, which is the job of economists. ...read more.

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