Scarcity of resources

All of economics is based on this notion of scarcity of resources. What does scarcity mean? Well, in an everyday context, it means that there's not as much of something, say a resource, as people may need, or there's not an unlimited amount of something. So, not unlimited, unlimited amount of a resource, or resources.

And I'll put a little "resources." The common examples, especially in an academic economics class when people are talking about scarcity and the resources they're talking about, they'll often say "land." And when by saying "land," they're speaking generally of natural resources. And so, examples of this would be things like energy; it could even be things like water, it could be lumber, it could be minerals, maybe some type of metal. Obviously, it could be land itself, and you could see some of that depicted in a picture like this. Clearly, there is land here, and you could even argue maybe even the solar energy that it has access to; these would all be broadly put into this category.

Now, another type of natural resource that is often talked about in an economics class will be labor. And labor we associate with people working, and that is what labor is making reference to. It's all about work effort, and when we talk about work effort, we could talk about the workers and how much they are working: so, hours of labor, hours of labor. And this picture right over here is a clear picture of some workers.

Now, another resource that you will often talk about in the context of scarcity is capital. And capital can be a little bit confusing at first. Well, it's things that people make in order to make other things. So, things made to make other things. And so, just to hit the point home here, pause this video. In these pictures, what capital do you actually see? Well, there's actually a bunch of capital in these pictures.

There's some of the obvious things like these tools; this would be a clear example of capital. Even these buildings: these buildings are used to maybe store animals or crops. So, these are things that someone made in order to help make other things. And some of maybe the less obvious things, even you might not even notice it at first, but there's these power lines here.

This is someone made this in order to help us distribute energy, which could be used to make other things, so that too could be used; that could be an example of capital here. Now, the fourth resource that you will hear folks talk about is really thinking about, well, how do we know how to combine these first three types of resources? And we could call that entrepreneurship.

Sometimes people will refer to technology, but this is all how to combine the above right over here, one through three, these types of resources right over here. Someone had to decide that, hey, these were good places to put these storage houses. Someone had to decide where to put the power lines. Someone just had to decide what crops to plant here and how to plant them. Someone had to decide, well, what type of labor do we need? What type of land? What type of capital? The actual factory building, the factory equipment do we need in order to produce whatever these folks are producing right over here?

And that general notion you could talk about as entrepreneurship. And so the big picture here is think about the world around you. There is not an unlimited amount of land, especially if you're thinking about land for a specific purpose. There's not an unlimited amount of natural resources: energy, lumber, some type of metal. There's not an unlimited amount of labor; there's only so many people who exist.

And there's not an unlimited amount of capital; we don't have an infinite number of buildings or equipment, and we don't have an infinite amount of entrepreneurship. We can only have so much energy to think about how do we put these other things together. So I will leave you there, and as we go further in our quest in economics, we're going to see the scarcity of these four resources show up over and over again.