Scarcity_and_Shortages

Microeconomics: Scarcity and Shortages A lot of people confuse the definition of scarcity and shortage, so they tend to get used out of text frequently. Scarcity differentiates from shortages by being involved in a certain availability of resources. The number of goods and services that are limited is what causes resources to be scarce. This is interpreted as not having the correct raw materials to produce, manufacture, or make a product. Due to this, the market will increase its original selling price until the time when the purchase price and current price become equal. An example of scarce items would be certain seasonal fruits (which are obviously limited). Only certain seasons allows for fruits to grow. Out of season, they become scarce since they cannot be grown. The price will increase due to the supply dropping. Shortages are based on a seller’s decision to stop selling a certain item at the current price tag. A good example for shortages would involve oil companies. Oil companies like to increase the price of their gas. To avoid the price hike, consumers are forced to minimize their gas usage. The companies in turn don’t want to sell more gas products at the amount the government put in place for the oil by trying to help consumers by placing excess profits taxes on these companies placing fixed gas prices. Scarcity in a way helps make the world go round. There are a lot of reasons why even the richest of people can’t solve the problem involving scarcity. The money people earn, didn’t do it during their leisure time, they gave up leisure time to make the money they wanted. Some use that money to buy nice expensive cars, which leaves them with less money for maybe a vacation. In other words, everyone has to “tradeoff” one thing to get something else. Without scarcity, people would have access to all of their daily needs, which would leave no need for anything to be prioritized or traded to get something else. Without scarcity, there would be no field of Economics. References Julita. (2011, August 10). Difference between Scarcity and Shortage. Retrieved from http://www.differencebetween.net/business/economics-business/difference-between-scarcity-and-shortage/