Scarcity and Choice | Cash Course | PragerU Kids

hey cash course fans before we start the show remember that you can get hundreds of free educational videos for all ages at pregnant kids.com subscribe today and never miss an episode have you ever noticed that life is full of limitations whether it's Time come on come on energy or resources great there just never seems to be enough in economics this is called scarcity which points to a fundamental disparity between unlimited human once we want more we want more and the limited resources available to satisfy them this is all I have left these resources include just about everything including natural resources like cattle water and land intangible assets like Knowledge and Skills and even the human labor to utilize those resources hey I'm working here scarcity has far-reaching concept quences affecting our individual daily choices the products and services that exist and the standard of living for entire nations in fact scarcity has been the source of conflict and Adventure throughout history including the search for spices gold and new lands if we had unlimited resources on the other hand choices would be much less difficult to make since everyone could have whatever and however much they wanted for example you could buy as many pairs of choose as you want and the store would never run out scarcity means that everyone must make choices whether they know it or not and whether they like it or not and it's scarcity that affects the most basic and fundamental decisions of any economy first scarcity influences what gets produced resources are limited so there can't be infinite kinds of services and products all at once in free markets the products that are in high demand relative to their supply and have a potential for profit are the products most likely to be made secondly scarcity constrains how much goods and services can be produced with the available resources producers must make decisions about how to allocate their limited inputs like raw materials capital and even time that often have competing uses lastly scarcity influences how what's produced gets distributed this isn't just about logistics like functioning roads but about the economic system and government policies that impact the exchange of goods and services in free markets just distribution is naturally decided by what consumers are willing and able to pay for the products in more controlled markets the system and policies can influence or determine whether things get distributed at all and could also determine whether a business or entire Industries exist for each of these there are no perfect decisions but rather imperfect tradeoffs this means that each producer whether a nation or a company must decide what to produce how much to produce and how to distribute what's produced if not care carefully considered producers risk wasting resources that could have been used for more productive and profitable purposes let's illustrate this using ah a simple bake sale let's first deal with how what's produced gets distributed to customers if there are few rules or restrictions to the bake sale you can produce whatever you think the customers want using your scarce resources materials and time and the customers can buy whatever they want with their scarce resource money and a free Exchange however say it's a bake sale with lots of rules and restrictions on who can buy when they can buy How It's Made and how much products can be sold for each requirement reduces the free exchange of goods on the producer Side by using up your scarce time and resources to meet those requirements thus potentially limiting your output or your profit and on the customer Side by limiting their choices fortunately this is the taste of Freedom bake sale great now you have to decide what to make and sell you have limited ingredients and time so you want to make sure to make something that people want to maximize your return you could make chocolate chip cookies chocolate cake or even brownies H I think I'll make chocolate chip cookies since they're the most popular that's probably true but being the most popular means other sellers might make those cookies as well meaning you'll have more competition selling the same thing to the same group of customers okay then I'll just make brownies not a bad idea since there might be fewer people selling those treats meaning less competition this provides another choice for customers who don't want cookies and could draw customers to you from the cookie sellers on the other hand by doing so you could risk missing sales since you didn't make the most popular thing so then either choice is going to be a problem well neither is all good or bad understanding scarcity means that each choice has its trade-offs but you still need to make a choice chocolate chip cookies it is then great now you need to decide how much to produce after all you don't want to be left with a whole lot of unsold cookies which translates to wasted time money and resources you also don't want to produce too little since it could result in wasted opportunities for additional sales and Profit the expected amount of customers the number of competitors the cost of materials and supplies and even the season or the weather can factor into how much you can and should produce all the small decisions in each of these questions apply to people businesses and whole Nations it may not seem like there's much risk with each decision but ignoring or misunderstanding scarcity can have very negative consequences from mild consequences like losing money on the bake sale great to extreme consequences like a nationwide famine from mismanaging entire Food Supplies please die may I have some more yeah something like that most people think of Economics as specifically being about money but it's so much more economics is about the choices that are made because of scarcity understanding that will help everyone make more informed decisions whether in business or in life and understand the consequences that come with those choices ooh speaking of choices with consequences I have some decisions to make watch more at prer kids.com and parents don't forget to subscribe