The Concept Of Scarcity

Scarcity is defined as the inability to satisfying the unlimited wants of consumers with the limited resources available for suppliers. It is the central economic problem that all societies face as suppliers produces with those scare resources. Prices are usually reflected on the cost to obtain the resources to make the product. In chapter seven, the authors talk about how scarcity of the ingredients for chocolate bars can influence the supply, price and the buyer’s willingness to pay (pg. 78). This demonstrates that the prices can hinge on the scarcity of a resource. This ultimately makes decisions costly. The supply and demand models could vary and ultimately change the equilibrium based on the scarcity of an item.

Scarcity also reveals the value of an item is different for each individual and their willingness to pay for it. Prices play a major role in separating people who have a high value for something from those who have a low value for it. This is what the role of quantity demanded tells us when evaluating a supply and demand graph. In chapter two, the authors explain the value on a Jackson Pollock painting

This is where the supply and demand models intersect each other and make the equilibrium point on the graph. Money has made it easier to associate prices rather than quoting prices with other goods and services. In chapter 3, we see how the Flintstones characters are negotiating prices for the goods or services (pg. 31). The consumer received the product he desired however; he had to give something of value for it. While the supplier on the other hand, received something of value from the buyer but it also costs him his product. This illustrates that the demand and supply models reflect the balance between scarcity and the value of the product to create the equilibrium