Scarcity

Much of microeconomics entails the study of how people choose under conditions of scarcity. Many people react to this description by saying that the subject is of little real relevance in developed countries, where material scarcity is largely a thing of the past. This reaction, however, takes too narrow a view of scarcity, for there are always important resources in short supply.

Time is a scarce resource for everyone, not just the terminally ill. In deciding which movies to see, for example, it is time, not the price of admission, that constrains most of us. With only a few free nights available each month, seeing one movie means not being able to see another, or not being able to have dinner with friends. Time and money are not the only important scarce resources. Consider the economic choice you confront when a friend invites you to a buffet brunch. You must decide how to fill your plate. Even if you are not rich, money would be no object, since you can eat as much as you want for free. Nor is time an obstacle, since you have all afternoon and would enjoy spending it in the company of your friend. The important scarce resource here is the capacity of your stomach.

Every choice involves important elements of scarcity. Sometimes the most relevant scarcity will involve money, but not always. Coping with scarcity is the essence of the human condition. Indeed, were it not for the problem of scarcity, life would be stripped of much of its intensity. For someone with an infinite lifetime and limitless material resources, hardly a single decision would ever matter.