The Seven Facts of Economic Life - Essay Example

Within this “economic pie” is the element of resources, which can be divided into its three components of natural resources, people, and capital. It is the people that convert the natural resources in an economy into products, while capital provides the means to do so. However, all these resources are limited providing the defining finite aspect of resources. The limitation of these resources and through that the product acts as a limiting factor on the wealth of a nation. That is the way the term Gross Domestic Product (GDP) is of such importance in the economics of a nation.

            More importantly, lowering of production also leads to scarcity in income, which can cause poor distribution of resources, whereby the individuals with better wealth or power have better access to resources than the economically disadvantaged and the needy. Economic growth reduces scarcity. However, for economic growth, the right economic policies to make proper use of economic resources have to be put in place. In the absence of economic growth, scarcity looms larger, reducing the “economic pie” and the availability of economic resources appropriately among members of society.