Price Of A Scarce Material example essay topic

The following facts are true of scarcity: 1. People economize, that is, they choose the alternative which seems best to them (involves the least cost and the greatest benefit.) 2. All choices involve cost. The opportunity cost is the second best choice people give up when they make their first (best) choice (Hazlitt, 41). 3. The consequences of choice lie in the future.

Economics stresses making decisions about the future -- what happens next -- because we cannot influence what happened in the past (Hueting, 123). Because of scarce resources and unlimited wants, decisions must be made about what goods and services we should produce, how to produce them, and for whom. These are the three fundamental economic questions every economic system must answer (Seplaki, 92). Here we must pause for an unexciting but crucial issue, yet another definition of scarcity. Ask yourself: If copper - or oil or any other good - were much scarcer today than it actually is, what would be the evidence of this scarcity? That is, what are the signs - the criteria - of a raw material being in short supply (Barnett, 28).

Upon reflection perhaps you will not expect a complete absence of the material as a sign of scarcity. We will not reach up to the shelf and suddenly find that it is completely bare. The scarcity of any raw material would only gradually increase. Long before the shelf would be bare, individuals and firms - the latter operating purely out of the self-interested drive to make profits - would be stockpiling supplies for future resale so that the shelf would never be completely bare (Seplaki, 94). Of course the price of the hoarded material would be high, but there still would be some quantities to be found at some price, just as there always has been some small amount of food for sale even in the midst of the very worst famines (Hueting, 128).

The preceding observation points to a key sign of what we generally mean by increasing scarcity: a price that has persistently risen. More generally speaking, cost and price - whatever we mean by price, and shortly we shall see that that term is often subject to question - will be our basic measures of scarcity (Coombs, 45). Therefore, scarcity is not something that does not exist physically, but something as of little supply as determined by the market demand. In some situations, though, prices can mislead us. Governments may prevent the price of a scarce material from rising high enough to clear the market - that is, to discourage enough buyers so that supply and demand come to be equal, as they ultimately will be in a free market. If so, there may be waiting lines or rationing, and these may also be taken as signs of scarcity.

Conclusion-summarize and suggest further study. In conclusion I would like to note that people face trade offs and there is no such thing as a free lunch. Making decisions requires trading off one goal (or good) for another. Examples include how a student spends her time, how a family decides to spend its income, how the U.S. government spends tax dollars, how regulations may protect the environment at a cost to firm owners.

A special example of a trade off is the trade off between efficiency and equity. One must remember that efficiency: the property of society getting the most it can from its scarce resources. Equity on the other hand is the property of distributing economic prosperity fairly among the members of society. For example, tax dollars paid by wealthy Americans and then distributed to those less fortunate may improve equity but lower the return to hard work and therefore reduce the level of output produced by our resources. This implies that the cost of this increased equity is a reduction in the efficient use of our resources. The countries and people use the opportunity cost principle to guide their decisions about how to deal with scarcity.

The wars, piracy, cheating, bribery, or price increases are just a few ways of dealing with limited resources.

Bibliography

Hazlitt, Henry, Economics in One Lesson, McGraw Hill, 2001.
Hueting, R, New scarcity and economic growth: more welfare through less production? , Penguin books, 2000.
Seplaki, Les, Economic Scarcity and Healthcare Quality: Tradeoffs in Delineations and Dilemmas, Prentice Hall, 2001.
Barnett, Harold, Scarcity and Growth the Economics of Natural Resource Availability, Penguin books, 2000.
Coombs, Herbert, The Return of Scarcity: Strategies for an Economic Future, Prentice Hall, 1999.
Banks, Ferdinand, Scarcity, energy, and economic progress, Oxford university Press, 2002.