Beginning economics.

“Economics is the study of the use of scarce resources which have alternative uses.”—Lionel Robbins

This has nothing to do with the economic system in place. It is true under capitalism and under communism. Man has always existed with conditions of scarcity. Man will always exist with conditions of scarcity.

It is important to note the difference between scarcity and shortage. A commodity can be scarce without there being a shortage. In the United States today there is no shortage of food. Much of the country is fighting a battle with obesity instead. Yet there is a scarcity. This scarcity is localized – and that is what results in food being traded. Most people in this country do not grow enough food to feed themselves. Farmers, on the other hand, do not produce enough farm machinery to keep their farms growing. Both sides find it preferable to split the tasks of producing machinery and producing food and to engage in trade to reduce the scarcity of both commodities.

This is the basis of all economic activity.

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