Economics U$A: 21st Century Edition
Resources and Scarcity (Macroeconomics)
Faced with dwindling resources, Congress fiercely debated whether to preserve 100 million acres of Alaskan land as a national park, or open the land for mineral exploration. World War II saw an unprecedented period of economic growth. The need to mobilize resources overseas quickly was palpable. In the 1970s U.S. textile industries risked competitive advantage in increasingly active Asian markets by investing more in the health of their workers. In all investments there are trade-offs and choices. These stories show how the cost of using some resources sometimes comes at the expense of others.
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To illustrate how unlimited wants and scarce resources lead to trade-offs and choices, and to show how the economic cost of using resources to produce a good is the value of the goods that could have been produced with those same resources.
- The amount of goods and services available for consumption in an economy depends on the quality of the economy’s productive resources, how well those resources are used, and whether all resources can be kept employed.
- Productive resources include: land, labor, machinery, structures, and technical and managerial knowledge of various types and qualities. These resources are called “scarce” resources because they are never able to produce everything that everybody wants.
- Resources tend to be more suitable for producing one type of good than another. Therefore, as more and more of a nation’s resources are devoted to the production of a specific good, there will be diminishing marginal returns.
- The cost to society of producing a certain good (i.e., shifting productive resources into the production of that good) is the value of the goods that those resources could have otherwise produced.
Meet the Series Experts
Economist and lawyer who drafted major pieces of New Deal legislation and served as head of the Council of Economic Advisers under President Harry S. Truman. From 1933 to 1946, he was an attorney for the Agricultural Adjustment Administration, a consultant to the Senate on social, economic, industrial, and financial issues, legislative assistant to Democratic New York Senator Robert F. Wagner, and General Counsel to the U.S. Housing Authority, Federal Public Housing Authority, and National Housing Agency. He helped draft many New Deal initiatives, including the National Industrial Recovery Act, the Social Security Act, and the National Labor Relations Act. Mr. Keyserling received his B.A. from Columbia University and L.L.B. from Harvard Law School, and he did graduate work in economics at Columbia University.
Policy Director for the Campaign for America’s Wilderness, and Conservation Director and Associate Executive Director for the Sierra Club for 17 years. Formerly, he managed a local environmental group in the San Juan Islands of Washington State, worked at The Wilderness Society, and was involved in the enactment of the Eastern Wilderness Areas Act (1975), The Endangered American Wilderness Act (1978), the Frank Church-River of No Return Wilderness (Idaho, 1980), the Alaska National Interest Lands Conservation Act (1980), and the California Desert Protection Act.
Director of Occupational Safety and Health for UNITE HERE, a union representing garment, textile, laundry, hotel, and restaurant workers. He was also the health and safety coordinator for Change to Win. He is a leading national trade union spokesperson on issues of job safety, health, and disability, including OSHA standard-setting and enforcement and surveillance of occupational disease and injury.
Economist and lawyer, renowned for his work during the Depression and World War II and for his ability to explain complex economic theories in plain language. He was among the first economists to apply economic theories directly from within the marketplace rather than from academia. He spent a good part of the Depression gathering unemployment statistics, which gave him a keen insight into the free enterprise system. Heavily involved in U.S. industrial mobilization during World War II, he was appointed Chair of the War Production Board’s planning committee in 1942. After the war, he started a consultancy firm called Robert R. Nathan Associates. Mr. Nathan received his B.A. and M.A. from the Wharton School at the University of Pennsylvania and L.L.B. from Georgetown University.
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5. In order to achieve point M, the economy would need to…
increase resources or expand technology.
6. Suppose that point J represents precisely the amount of food consumed by the economy, but 5% more tractors than the economy presently uses in producing its food. If the demand for food rises, and society begins using the additional 5% of its tractors to produce this extra food, the output will…
Move to an undetermined point on a new production possibilities curve. The tractors are an example of a capital resource that can be used to produce other goods—in this case, food. In other words, output sometimes creates its own resources. The most efficient use of resources in this case probably demands that all the tractors be used in producing food. This will put the new output combination at a point somewhere directly to the right of J on the graph—i.e., more food, the same number of tractors. The point M represents a decrease in tractor production from J, so M cannot be the right answer. This new production point is not reflected in the current production possibilities curve.
Opportunities presented via Rational Choice Theory, given the pre-existing notion that resources are scarce.
How much extra use is gained from incremental increases in the quantity of goods created, sold, etc., and how those measures relate to consumer choice and demand.
- opportunity cost
The value of what certain resources could have produced had they been used in the best alternative way. Also called alternative cost.
- scarcity of resources
The basic principle of limited resources within an economy of unlimited wants.
Commodities with a positive cross-elasticity of demand (a decrease in the price of one commodity will result in a decrease in the quantity demanded of the other commodity).
Refers to losing one quality or aspect of something in return for gaining another quality or aspect.