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Sigmund Freud

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SCARCITY
SCARCITY

Introduction

We live in the world of scarcity. None of us can have all that we want. It is the most fundamental concept in economics. We do not and cannot have enough income or wealth to satisfy our every desire for these develop and expand with every technological advancement. The world is such that no matter how much we produce; we cannot have as much of everything desired without sacrifice. Scarcity occurs for everyone, rich and poor. In economics, this sacrifice is called opportunity cost. (chon, 2011)

Humanity is demanding over greater economic productivity at a time when natural resources, the input that feeds this productivity, are dwindling. To reduce pressure on key assets, such as water, minerals, fuel and land, we must use less of them, and we need to increase the efficiency and productivity of resources that we do use, to achieve more output per input. Put simply, we must do more with less. Developing this society will require large-scale and widespread changes to how the economy functions. However, scientific, economic and social research can play an important role in reaching this goal, by determining current levels of consumption, measuring levels of efficiency, and developing new, more efficient technologies and processes. Furthermore, it can analyse different policy options and help us understand their impact on behavior and perceptions of resource use. (Brown,1995)
This paper will focus on scarcity and the use of PPC to reduce scarcity.

Example of scarcity in Asia. (TRANSPORTATIONS)

Like many economic activities that are intensive in infrastructures, the transport sector is an important component of the economy impacting on development and the welfare of populations. When transport systems are efficient, they provide economic and social opportunities and benefits that result in positive multipliers effects such as better accessibility to markets, employment and additional investments. (Brown, 1995) When transport systems are deficient in terms of capacity or reliability, they can have an economic cost such as reduced or missed opportunities. Efficient transportation (Busses) reduces costs, while inefficient (Cars) transportation increases costs. Transport also carries an important social and environmental load, which cannot be neglected. The impacts of transportation are not always intended however one can have unforeseen or unintended consequences such as congestion or time wastage.

Problems with scarcity

Using the example given above, reducing cars cannot solve the issue of scarcity. Unless the price is raised, supply will not rise and demand will not fall so that the demand and supply equal at a given higher price. When scarcity exists and cars are reduced, scarcity will increase as the demand will increase but supply will fall. However opposite and incorrect influenced by problems suffered by the people who cannot afford high prices. (Cohn, 2011)

They will think because the price is high only the rich are able to purchase things and consequently poor people are deprived of the goods they need to buy and but cannot buy because of high prices. They do not think about what happens to demand, supply and mismatch between demand and supply if the prices are reduced.

During the peak morning or evening hours, the issues faced on road are mainly excessive pollution in Asia. Other issues by commuters on road as well as in local trains are delays, stress, and discomfort during journeys, intangible professional costs, accidents and the potential for physical injuries.

Infrastructure has many features of a public good, meaning it's very difficult to keep nonpayers from using them and there's often little reason to do so because there's no opportunity cost for extra users. Infrastructure in transportations includes a whole bunch of capital that often takes years if not decades to produce. (Grigg, 2010)

Below shows an article on how countries resolve scarcity on transportation:

In 1975, Singapore introduced a scheme that levied a charge for the right to enter a 6km2 zone covering the central area during morning peak hours, unless the vehicle had four or more passengers (1€/day or 20€/month). In 1998, this was replaced by an electronic system with smart cards in the vehicles. The pricing is based on a per-trip-system with highest tolls in the peak hours. With the introduction of this scheme in 1975 there was a reduction of car peak traffic by 45% - and in the last 30 years it stayed on this low level without any major increases. The use of public transport by commuters rose from 46% to 65%.
The London scheme, one of the largest of its kind in the world, charges vehicles driving into central London a flat fee of €12 a day between 7:00 am and 6:00 pm. The results are very successful: car traffic in the zone was reduced by 15% and congestion by 30%. Traffic speed increased by 37%. This led to reduced fuel consumption of 10% and reduced CO2 -emissions of 19%. It is planned to double the size of the zone by end 2007.

Cited http://www.worldenergy.org/publications/energy_efficiency_policies_around_the_world_review_and_evaluation/3_evaluation_of_energy_efficiency_policies_and_measures/1194.asp

Resolving Scarcity

If resources were great enough to produce more than anyone desired, there would also be no scarcity. Scarce resources determine the location of society's production possibilities frontier or curve (PPF). Inefficiencies in the use of resources (less than full employment or inappropriate employment of inputs like land and capital) may limit the amount produced so that the economy operates below its PPF.

Picture above was cited from http://13otsusa.files.wordpress.com/2012/05/screen-shot-2010-09-07-at-11-03-07-pm.png

Goods (A) represents: Cars
Goods (B) represent: Buses (Public transport)

The PPC shows an increase in developments. From the above, the arrow point outwards shows the development in its infrastructure. When productivity increases, its infrastructure gets more developments. It is therefore an incentive to increase the development of infrastructure. In order to resolve scarcity, development in infrastructure is essential in the economy. With the outward shift of the PPC, the production capacity in the economy could increase when the amount of productivity factors is input. An effective strategy is the used of gathering the demand of an economy by ensuring the increase in the production capability in the economy while increasing their outputs. (Sadler, 2010)

To suggest some ways in reducing scarcity in Asia, be it in India or Thailand etc. Offices can decide on shifts. Perhaps, starts and ends office timing such as 8:30 a.m. till 5:00 p.m., 9:00 a.m. till 5:30 p.m., 9:30 a.m. till 6:00 p.m., 10:00 a.m. till 6:30 p.m., 10:30 a.m. till 7:00 p.m. By doing so, it may reduce congestion on roads during peak hour.

Conclusion

Scarcity is defined as the condition of human wants and needs exceeding production possibilities. In other words, society does not have sufficient productive resources to fulfill those wants and needs. Alternatively, scarcity implies that not all of society's goals can be fully attained at the same time, so that trade-offs are made of one good against others. If somehow people desired nothing, there would be no scarcity. If resources were great enough to produce more than anyone desired, there would also be no scarcity. Scarcity value is the economic factor that increases an item's relative price based more upon its relatively low supply. Whereas the prices of newly-produced manufactured products depends mostly on the cost of production.

REFERENCE

Articles * http://13otsusa.files.wordpress.com/2012/05/screen-shot-2010-09-07-at-11-03-07-pm.png * http://www.worldenergy.org/publications/energy_efficiency_policies_around_the_world_review_and_evaluation/3_evaluation_of_energy_efficiency_policies_and_measures/1194.asp

Books * Brown, W. (1995). Principle Of Economics. Westgroup * Chon, J. (2008). What Is Scarcity?. Crabtree publishing company * Grigg, N. (2010) Infrastructure Finance. John wiley & sons, Inc * Sadler, P. (2010). Sustainable Growth In Post Scarcity World. Gower publishing limited

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