Scarcity Pricing That Makes Economic Sense Frank A. Wolak Chair, Market Surveillance Committee Market Surveillance Committee Meeting/ Stakeholder Meeting June 6, 2007. Land – a shortage of fertile land for populations to grow food. That means prices go up, because people are willing to pay more to beat the competition in getting resources. It is the fundamental economic problem of having what appears to be limitless human wants in a world with limited resources. Introduction—What is scarcity in an economic sense? Extreme scarcity can mean there are not enough resources at any price, and an economy can collapse as a result. This illustrates Simon’s point that the “ultimate resource” is the human ingenuity that finds new and better ways of using physical resources. If resources become scarce, competition for those resources increases. Examples of scarcity. Scarcity is one of the economic assumptions that economists make. One cannot get enough economic products to satisfy individual wants and needs. Scarcity is one of the fundamental issues in economics. A consumer good is intended for final use by individuals; a capital good is used to produce other goods and services. Scarcity or paucity in economics refers to limitation – limited supplies, components, raw materials, and goods – in an environment with unlimited human wants. Examples of Scarcity. In an important sense, the actual economic resource was not copper but “the ability to convey voice and data.” And that resource has become “less scarce” by the substitution of sand. Economics seeks to solve the problem of scarcity, which is when human wants for goods and services exceed the available supply. Scarcity and choice form the basis of economic activities. Services—What kind of economic product is a service? So do cities, towns, households and individuals. Goods—What is the difference between a consumer good and a capital good? A modern economy displays a division of labor, in which people earn income by specializing in what they produce and then use that income to purchase the products they need or want. Scarcity is not only an individual problem, it affects the well-being of a nation. In the 1970s, the world’s major industrial countries faced considerable petroleum shortages which resulted in price increases. For example, the desertification of the Sahara is causing a decline in land useful for farming in Sub-Saharan African countries. This is what they mean by scarcity Scarcity refers to the basic economic problem, the gap between limited – that is, scarce – resources and theoretically limitless wants.

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