SCARCITY AND CHOICE
According to Lord Robbins, “Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.” This definition underscores the importance of scarcity in the study of economics.
i) Economics is related to one aspect of human behaviour of maximizing satisfaction from scarce resources.
ii) Ends or wants are unlimited. When a particular want is satisfied others crop up to take its place. Multiplicity of wants makes it important for human beings to work endlessly for the satisfaction of their wants but humans are unable to satisfy all.
iii) The scarcity of means or resources at the disposal of mankind makes it impossible to satisfy unlimited wants. The time and means available for satisfying these ends are scarce and limited in supply.
iv) Scarce resources or means are capable of alternative uses. Land for example can be used for growing rice, sugarcane, wheat or maize etc. likewise gas can be used in factories or homes for generation of electricity and cooking. At a time, the use of a scarce resource for one end prevents its use for any other purpose.
v) Human ends are of varying importance which leads to the problem of choice. To select the use to which scarce resources can be put e.g. A pilot can only decide to either fly to the UK or Canada at a particular point in time.
vi) Economics is related to all kinds of behaviour that involve the problem of choice. The problem of how to build a building with a given resources is technical, but the problem of choosing the best combination of resources is economics.
Economics is a valuation process which is concerned with multiple ends and scarce means being put to alternative uses in order of their importance or priority. In summary, economic problem is one of economizing scarce means or resources in relation to numerous ends or wants.
SCALE OF PREFERENCE
As shown above, economic problem is one of economizing scarce resources in relation to numerous wants. It is necessary to draw a scale of preference in order of priority.
A scale of preference is the arrangement of our numerous wants in their order of priority, the most pressing or desired want is ranked first and the least desired want is ranked last.
For a student his scale of preference will look like this;
SCALE OF PREFERENCE
To the above hypothetical student the most pressing need is “Exercise book” while the least is “Cardigan”.
Simply put, opportunity cost is alternative foregone. Opportunity cost arises from scarcity of resources and multiplicity of wants. When confronted between two choices such as growing rice or yam on a plot of land. If one chose to grow yam instead of rice, the opportunity cost of the choice of yam is the alternative forgone instead of rice. It is also related with relaxation foregone for doing overtime.