Topics: Scarcity, Supply and demand, Economics Pages: 7 (2537 words) Published: October 7, 2013
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Reducing price cannot solve scarcity problem. Scarcity means short supply of certain thing relative to demand at any given price. 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 there exists scarcity, if the price is reduced scarcity will increase as the demand will increase but supply will fall. Layman thinking is however opposite and incorrect influenced by problems suffered by the people who cannot afford high prices. They think the because the price is high only rich people are able to purchase things and hoard then 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. Often for neccaity/ essential good in short supplies, govts. supply rationed quantities to poor people at subsidized price. Energy and fuel is in short supply, so prices of gasoline has increased. If the prices are reduced arbitrarily, more gasoline will be demanded. On other hand, if gasoline prices rise further, it is possible that use of alternative fuels/ energy to drive cars will become economic and these solar powered/ dio diesl powered/ electric battery operated vehicles will become competitive to gas powered vehicles. To get further convinced that you are right about the statement " The most efficient way to reduce scarcity is by reducing price" being False read the notes and visit the sources listed below.. Notes:

1.In economics, 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. In an influential 1932 essay, Lionel Robbins defined economics as "the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses." Goods and services are scarce because of the limited availability of resources (the factors of production) along with the limits on our technology and skillful people relative to the total amount desired. 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. 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. It is difficult to abolish all inefficiencies, and some characterize institutional inefficiency as artificial scarcity. Goods (including services) that are scarce are called economic goods (or simply 'goods' if their scarcity is presumed). Other goods are called free goods if they are desired but in such abundance that they are not scarce, such as air and seawater. Too much of something freely available can informally be referred to as a 'bad', but then its absence can classified as a good, thus, a mown lawn, clean air, etc. Where goods are scarce it is necessary for society to make choices as to how they are allocated and used. Economists study (among other things) how societies perform the optimal allocation of these resources — along with how societies often fail to attain this optimality and are instead inefficient. For example, we may all want to own gold jewellery. The amount of gold available, however, is limited, so it is necessary to make choices as to how it is allocated. In a market economy, this is achieved by trade. Other ways to make this decision involve tradition, community democracy, and government...
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