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Chapter 4: Problem 12

Briefly explain whether you agree with the following statement: "If there is a shortage of a good, it must be scarce, but there is not a shortage of every scarce good."

Short Answer

Expert verified
The statement 'If there is a shortage of a good, it must be scarce, but there is not a shortage of every scarce good.' is correct as all shortages are a result of scarcity, but not all scarce goods experience a shortage. Understanding the difference between shortage (demand exceeds supply) and scarcity (availability is limited) clears up this statement.

Step by step solution

01

Define Shortage and Scarcity

Firstly, it is critical to understand the definition of both terms. Shortage is a market condition in which there is a demand for a product or service but insufficient resources or supplies to meet this demand. Scarcity, on the other hand, is a fundamental economic problem where there is an insufficiency or shortage of resources to meet all human wants and needs.
02

Analyze The Interrelation between Shortage and Scarcity

The interrelation between these two concepts is that all shortages are indeed a result of scarcity since there aren't enough resources to meet the demand. However, not all scarce goods experience a shortage. For instance, Diamonds are scarce because they are not readily available or abundant. Although, there isn't necessarily a shortage of them because the demand is met by the supply.
03

Formulate the Final Concurrence/Dissension

With the understanding of these concepts, it can be concluded that while the statement 'If there is a shortage of a good, it must be scarce' is correct, the second part of the statement 'there is not a shortage of every scarce good' is also valid.

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