Scarcity is a
fundamental concept in economics. It can be described as the products available
are too few to fulfill people's desires (Cohn, J. 2009). Sources are limited if
any individual, firms or government would want to have more of that good or service
than they already have. As an individual, we experience a scarcity of time and
spending power. Given more of either, we could have more of the products or services
that we wish. The scarcities of firms are usually the land, labour, raw materials
and capital. Furthermore, most products and services are limited, for those
that are not are known as free goods. Where products are limited, it is
necessary for society to make options as to how they spend and allocate these
resources to execute the optimal allocation. Resource Scarcity was the most contentious
issue for participants when considering which world problems are currently
overlooked or underestimated by the whole society. This discussion basically involves
the discussion about whether or not governmental experts are fear-mongering
when they create dire resource forecasts. As a trend, resource scarcity
increased in significance from 7th to 4th place since 2011, with the large of concern
arriving from Northern United states participants as trees in woodlands are
reducing dramatically http://reports.weforum.org/global-agenda-survey-2012/view/trends/scarcity-of-resources/ (World Economic Forum 2012).
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| Bill Gates having discussion in the World Economic Forum. |
Scarcity
value is the economic factor that improves an item's comparative price based
more upon its relatively low supply (Metha,
L. 2011). For example, the price of newly-produced manufactured items
relies upon mostly on the price of production, which is mainly focus on the
price of inputs used to produce them. This kind of items have a supply curve
that is very elastic or even horizontally, so that a rise in demand increases
the quantity of production much more than the price. The price mostly reflects
the scarcity of the inputs but not that of the product itself. In the other
hand, the price of some unique items such as rare stamps and antiques reflects the scarcity of the items
themselves. These precious items have inelastic or even vertical supply curves, so that a rise in the demand for the item
mostly improves the price and not the amount supplied. The supplier of the item
gets a price higher than the price of generating the item and so receives
producer's surplus when demand is high.
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Inelastic supply and elastic supply
Comparison.
Sources: http://www.tutor2u.net/economics/revision-notes/as-markets-price-elasticity-of-supply.html |
Scarcity
plays a pivotal role in defining the price of an item. Prices are evidence that
products are limited and that people makes options about their needs and wants.
As every nation have different scarcity of natural resources, everyone want to
enhance their situation, but everything has a finite amount, so the price of a
same item will be different and vary in different nation or area. The best
evidence to proof that scarcity describes the price of item is by evaluating
the water cost in Malaysia and Singapore. Malaysia is very well known for a
wide range of natural resources and there are roughly 66 rivers in Malaysia,
and the lengthiest stream is Rajang River, situated in Sarawak. In the other
hand, surrounding country- Singapore is a small isle nation but its’ economic
system is one of most flourishing in the world, with a powerful worldwide
business trade link (The Heritage Foundation 2013). Due to deficiency of the
water resources, Singapore used to rely on imported water, especially from
Malaysia (Mywaterbottle Organization 2013). As water supply in Singapore
experience a serious scarcity situation, a 1.5 liter bottled water in Singapore
costs about RM3.58 (SD$1.50), however it cost only RM2 per bottle in Malaysia (Numbeo
2013). As from above, scarcity obviously has a powerful influence in determining
the price of an item.
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| Singapore gets 40 per cent of its water from
Malaysia through three pipelines sources: http://www.downtoearth.org.in/content/singapore-taps-its-water |
Scarcity and
shortage is two totally different things. A shortage is when the demand
for for a good exceeds the supply,
usually significance the price is too low and the market is not clearing (Econport Organization 2013). In this situation, when all other effects on
consumers’ planned purchases remain the same, in order to archive market equilibrium, firms should set
the price higher. As individuals’ income remains the same, they could not afford
the same amount they previously purchased, they would either reduce the quantity
of purchasing on this product or search for cheaper
substitution, so the quantity demanded of
the good decline. For example, if the prices of fuel are reduced
randomly, more gasoline will be required. On the contrary, if gasoline prices
increase further, it is possible that use of alternative energy sources such as
fuel to drive vehicles will become economic and solar
powered, bio diesel powered and electric battery operated automobiles
will become aggressive to gas managed automobiles. Apart from that, scarcity
means short supply of certain thing comparative to demand at any given cost. In
this scenario, reducing price technique cannot fix the problem because scarcity
will increase as the demand will increase but supply will drop. Unless the
price is brought up, supply will not increase and demand will not fall so that
the supply and demand equivalent at a given higher equilibrium price. However, all kind of sources are limited, society
does not have adequate productive resources to meet up with those wants and
needs, not all of society's objectives can be completely attained at the same time and this is an
unchangeable fact. In a nutshell, scarcity always prevails, but a shortage can
be fixed.
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At
P3, Qd is greater than Qs, a shortage in market occur. In order fixed it,
Qd
must equal to Qs and archive market equilibrium, which the price is P2 .
|
Moreover, there are a powerful connection
between Scarcity and Opportunity Cost. Both of them signify two interlinking
ideas in economics as firms must often select among limited sources (Heartfield,
J. 2008). Usually, economic resources are
not fully available at all times in endless figures, so firms must select about
which sources to use during manufacturing. The opportunity cost symbolizes that
if organizations have two alternatives of
resources, normally they will select the more important alternative that will give them more advantages. For example, an instrument
manufacture firm might want to use Maple timber to produce a guitar. Due to the
scarcity of local wood produce, which has inadequate Maple timber on the
market, the instrument manufacturer is forced to use redwood instead. Therefore, the
opportunity cost is the Maple timber the instrument manufacturer
preferred in the first place. As a consequence, scarcity
and opportunity cost can generally be the greatest drivers in options
made due to the powerlessness of a company to continue generating certain
products in a long-run. In the end of the day, everything in economics has a
value. As recourses are always scarce, there will always be opportunity cost to
the options we make.
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| Example of Maple wood and Redwood guitar body. |
(An interesting video of explaining relationship between Scarcity and
Opportunity Cost)
In fact, scarcity can
be created or manipulated by regulations or “Green Belt” industry. The term Green Belt started in London, United
of Kingdom during the Thirties where there the periphery
of land around the town or city was accorded
this status (Green Belt UK Politics 2011). Tough regulations
discouraged property developments in this
area so as to create scarcity. The
primary purpose is to control the quantity of houses in this place so that
property prices and rents will always be high because there are not many
options or alternatives to select from.
Another motive is to control the number of people residing in the city so that
the city will be free from contamination, congestion
and other social issues that are associated with increased
inhabitants. In Malaysia, our edition of the Green
Belt in Kuala Lumpur is located nearby the Bukit Bintang area, known as
“The Golden Triangle”. Rentals in this area are
able to coordinate those in other significant cities around the world like
Singapore, Taipei, New York and so on. Besides that, Green Belt organizations are able to take advantage to capitalize
their strengths from scarcities that occur within their Sectors. Due to the
characteristics of granting licenses in
Malaysia, it allows many organizations virtually
function in a monopolistic way. Furthermore, Green belt organizations are able
to charge higher price to customers at their whims. It is because customers
have only one choice, use it or leave it, due to scarcity and being the
monopoly. Organizations that experienced Green Belt status are Petronas, PLUS Highway, Bernas, Indah Water and
many more.
.JPG) |
Examples
of Green Belt Companies in Malaysia.
|
One of the dominant
aspects for why international trade happens is due to the existence of
Scarcity. As a country's resources are limited, they do not have some of the resources
or capacity to fulfill domestic needs and
desires. Therefore, countries can generate a surplus by developing and exploiting their domestic scare resources, and trade this
for the resources they need. Items or services are likely to be imported from
overseas for several reasons. Imports may be less expensive, or of better
quality. They may also be more easily available or simply more attractive than
regionally manufactured products. In many circumstances, no local alternatives
are available, and importing is necessary. For example, Malaysia is the primary
exporter for natural rubber and palm oil. The other exports include cocoa, pepper, pineapple and tobacco, saw logs
and sawn wood. As Malaysia’s digital and electronic
technology level is not that innovative, electrical
and electronic product is the primary import products in year 2012 which
had occupied 28.8 percent in total imports (Malaysia External Trade
Development Corporation 2013).
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Major
Imports of Malaysia in 2012. Electrical & Electronic products is the main
import.
|
Without scarcity,
economics is impossible. If things were not limited and individuals did not
have to make options because everything was easily available, the amount
available for everything will be infinity. Directly, individuals would not
compelled to proceed any trade-offs among their needs and desires. Thus, there
will be no more economy as everyone gets what they need and are pleased with
this present situation.
(1594
words)
Reference:
Cohn.,
J (2009) What is Scarcity of Resources.
United States of America: Crabtree Publishing Company.
Econport
Organization (2013) Market Surpluses and
Market Shortages. Available from:
http://www.econport.org/content/handbook/Equilibrium/surplus-and-shortage.html
[Accessed 01 June 2013]
Green
Belt UK Politics (2011) History of Green
Belt in UK. Available from:
http://www.politics-greenbelt.org.uk/history-of-green-belt-in-the-uk.html
[Accessed 01 June 2013]
Heartfield, J.
(2008) Green Capitalism: Manufacturing
Scarcity in an age of Abundance. United States of America: Mute Publishing Ltd.
Malaysia
External Trade Development Corporation (2013) Top 10 Major Import Products 2012. Available from: http://www.matrade.gov.my/en/malaysia-exporters-section/33/1945-top-10-major-import-products-2012
[Accessed 02 June 2013]
Metha, L.
(2011) The Limits to Scarcity: Contesting
the Politics of Allocation. United Kingdom: Earthscan Ltd.
Mywaterbottle
Organization (2013) Learn. Available from:
http://www.mywaterbottle.org/learn/ [Accessed 29 May 2013]
http://www.mywaterbottle.org/learn/ [Accessed 29 May 2013]
Numbeo
(2013) Cost of Living Comparison between
Malaysia and Singapore. Available from: http://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=Malaysia&country2=Singapore
[Accessed 29 May 2013]
The
Heritage Foundation (2013) 2013 Index of
Economic Freedom. Available from:
http://www.heritage.org/index/country/singapore [Accessed 29 May 2013]
http://www.heritage.org/index/country/singapore [Accessed 29 May 2013]
http://reports.weforum.org/global-agenda-survey-2012/view/trends/scarcity-of-resources/
[Accessed 28 May 2013]
[Accessed 28 May 2013]
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