Establishing Construction Economics - Assignment Example

The Problem of ScarcityEconomics, derived from a Greek word, is a science that studies ‘production, distribution, trade, and consumption of goods and services taking place in an economy (Wikipedia). Influencing the economic activities is the central problem with which economics concerns itself—the universal and often known as ‘the basic economic problem’ which is the problem of scarcity of resources. The interplay of demand and supply, the process of production, distribution, and consumption depend heavily on the proper allocation and use of the limited resources of nature.

For any economy to prosper there has to be a careful and intelligent use and allocation of scarce resources to different segments of production.Hence, the core of economics includes a ‘study of how human beings allocate scarce resources to produce various commodities and how those commodities are distributed for consumption among the people in society. The essence of economics lies in the fact that resources are scarce, or at least limited, and that not all human needs and desires can be met’ (Encyclopedia).

In 1931, the famous economist Robbins published his famous book, An Essay on the Nature and Significance of Economic Science, stated that economics studied the problems in society that arise due to the scarcity of resources. According to him, ‘nature has not provided mankind sufficient resources to satisfy all his wants. Therefore, people have to choose for which ends or for which wants the resources are to be utilized’ (Ahuja, 2004).According to Wikipedia, ‘scarcity is defined as: when the price is zero, the quantity demanded exceeds the quantity supplied.

Price is a measure of relative scarcity. If all other market variables are held constant, when the price is rising, this indicates the commodity is becoming relatively scarcer’. As stated by Samuelson and Nordhaus in their book Economics, ‘the essence of economics is to acknowledge the reality of scarcity and then figure out how to organize society in a way which produces the most efficient use of resources. This is where economics makes its unique contribution’ (2002).Economies everywhere face the problem of scarcity and an economic analysis aims to maximize utilities such as ‘leisure time, wealth, happiness… subject to constraints’ or scarcities (Wikipedia).