Posted: June 28th, 2022

Scarce Resources/Factors of Production and Their Impact on the Economy

This essay should cover the topic of scarce resources/factors of production and their impact on the economy. Examine the consequences of scarce resources on economic growth.

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Scarce Resources/Factors of Production and Their Impact on the Economy

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Scarce Resources/Factors of Production and Their Impact on the Economy
Factors of production are resources utilized in producing goods and services to support economic development. Different factors of production affect sustainable development, growth, and transformation of the economy in different ways. Understanding factors of production creates the ability to evaluate the impact of scarce resources on economic growth. The consequences of scarce resources on economic growth are examined throughout the paper.
Factors of production are mainly categorized into four groups: capital, land, labor, and entrepreneurship. Capital as a factor of production involves tools and buildings used in the production of goods and services, such as computers, hammers, classrooms, and delivery vans. Land as a factor of production involves any natural resources of anything that comes of land that is utilized in the production of goods and services, such as water, forest, oil, and coal (Matthew, 2008). Labor as a factor of production involves human efforts or activities contributing to the production of goods and services. Finally, entrepreneurship as a production factor involves combining other production factors by an individual to enhance goods and service production towards earning profits. The factors of production as resources of economic growth will have an impact on the economic growth when they increase or decrease.
Economists have remained concerned about the limits of Earth’s ability to provide factors of production to support economic growth over the centuries. Such limits have been associated with the existence of scarcity of resources. Scarce resources involve three primary variations, including the minimalist account, which is concerned with the availability of resources essential in satisfying basic human needs, such as shelter and food (Tvaronaviciene & Lankauskienė, 2013). The other variation is the moderate account that is concerned with the availability of resources capable of supporting the project and predicted consumption at current or higher levels. The third variation is the maximalist account that involves the actual demand of resources for human and non-human species. For economic growth to be achieved, a balance must exist between the power of factors of production and power of population need and consumption. Therefore, resource scarcity is associated with the ability to have an adequate supply of resources. However, any form of imbalance between humans’ needs and resources has consequences on economic growth.
Some of the significant consequences of economic growth resulting from the imbalance resulting in resource scarcity include delaying globalization. Globalization is an essential factor in economic growth, a planetary process that promotes interconnectedness and interdependence to accelerate economic growth. The scarcity of resources essential for globalization, such as global networks that play a vital role in facilitating trade and creating new opportunities for economies to identify and access new economic supplies, has resulted in nation-states with lower power and authority to achieve globalization (Matthew, 2008). For instance, regions with low access to global networks will face a high demand for such networks resulting in higher costs, such as the importation of resources lowering the chances of achieving sustainable and study economic growth.
Regions with scarce resources tend to have conflicts associated with the struggle for scarce resources. For instance, the scarcity of natural resources such as minerals has created conflicts between regions, with others developing into an interstate civil war that has unstabilized the platform of achieving economic growth. Oil has been one of the natural resources that have resulted in interstate conflicts, such as in Iraq, South Sudan, and Syria, where groups and regions for alliances against others in securing the oil resources creating conflicts that have left the nations’ ability to achieve economic growth in jeopardy. Such conflicts have also weakened government systems making it more difficult for governments to manage other forms of scarce resources required for economic development and growth.
The decline of resources, such as water and food production, facilitates migration. With people unable to achieve their basic needs due to resource scarcity, therefore not being able to improve their living expectations, they tend to move to regions with resources to fulfill their needs. However, such migration results in a lack of economic growth in the original region and causes conflicts in the regions they migrate to as they cause the demand for the resource to increase. Climate change has been a significant factor contributing to further resource scarcity. Climate change offers conditions that do not support most factors of production, reducing the resources available for the production of goods and services essential for economic growth. Regions that already face scarcity of resources face a more complex situation with climate change, furthering resource scarcity by affecting agricultural production. The resource scarcity scale that can be created by climate change goes to extend that it makes it even tricky for technological solutions to be applied in balancing the factors of production and human and non-human demands required in achieving economic growth (CNA Corporation, 2007). Factors of production play a significant role in enabling economic development and growth by providing resources needed to achieve growth. Therefore, resource scarcity results in struggles and conflicts that unstabilize the ability to create an environment that supports systems that enable economic growth.
References
CNA Corporation. (2007). National Security and the Threat of Climate Change. Retrieved July 8, 2021, from http://securityandclimate.cna.org/report/
Matthew, R. (2008). Resource Scarcity: Responding to the Security Challenge. International Peace Institute. Retrieved July 8, 2021, from https://www.ipinst.org/wp-content/uploads/2015/06/rscar0408.pdf
Tvaronaviciene, M., & Lankauskienė, M. (2013). The Impact of Production Factors and Economic Structures on Economic Development. Verslas Teorija ir Praktika, 14(1), 5-16.