16.2.3 Relative scarcity Producers need resources like machines, raw materials and people to meet consumer needs and wants. These resources can be limited, creating relative scarcity. This means there aren’t enough resources to satisfy everyone’s unlimited needs and wants.
SkillBuilder discussion Investigating 1. What happens when the resources we need are limited? 2. Why does scarcity occur in our economy? 3. How does scarcity affect our choices?
FIGURE3 Scarcity happens when limited resources can’t meet our unlimited needs and wants.
Wants and needs (unlimited)
Resources (limited)
Scarcity
16.2.4 Opportunity cost Since resources are limited but needs and wants are unlimited, the economy must make important choices, like in Australia. • What to produce? What goods and services will the economy produce? Will we produce cars or clothes, railway systems, or roads and bridges? Businesses choose based on what consumers want and will buy. • How to produce? What methods of production will businesses use to produce the goods and services we want? Businesses can use machines, workers or both. They can get materials from local suppliers or overseas. • Which consumers to produce for? Businesses need to decide which consumers will be able to buy the goods and services. The price of a good or service depends on consumer income , demand and the business’s proýt goals. Just as the economy as a whole and businesses need to make choices, so too do consumers. This is because most consumers have some limit to their income. So, they will need to decide what to buy. Making this choice is known as opportunity cost . For example, on the weekend, you might choose to play basketball with your team or go to the movies with friends. If you pick basketball, you miss out on the movies. Every choice has a cost, and consumers try to keep these costs low. 16.2.5 Producers and consumers The economy is like a cycle. Producers make and sell goods and services, while consumers buy them. Producers pay their employees and hope to make money from sales. This money is then used to buy from other producers. Producers need consumers to buy from them, and consumers need producers to provide what they want.
550 Jacaranda Humanities Alive 7 Victorian Curriculum Third Edition
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