Q_need: Total quantity need (or desire) of a good. It includes the demand
already satisfied (and not on sale) and the total demand ( Q_absolute_demand)
which includes the demand which can not be satisfied due to the lack a money of
the economic actors.
Q_absolute_demand: Total demand unsatisfied which includes the demand
which will never be satisfied due to dissuade price of the item for the consumer
and the demand which will be satisfied ( Q_demand )
Q_offert: Total offer of a product
Q_demand: Total demand, which will be satisfied. It is a
temporary demand, which will be satisfied, as the price is not dissuasive to
the consumer. This is the demand defined in the economical books.
Q_demand < Q_absolute_demand except if
Q_offert > Q_absolute_demand where the price will fall such as Q_demand =
Q_absolute_demand.
Q_existing: The existing quantity of a good which includes what
is on sell or not.
In order to differentiate good in relation
to the market, I will create the concept of "scarcity", the inelastic
goods are often "abundant" goods which had filled up the market
whereas those of type B are "scarce" goods.
The measurement of scarcity of good A is
defined by the formula:
Scarcity_A = (Q_need_A - Q_ existance _A) /
Q_existance_A (1)
As Q_need_A = Q_absolute_demand_A + Q_
existance_A - Q_offer_A (2)
Then
(1) + (2) => Scarcity_A = (
Q_absolute_demand_A - Q_ offert_A) / Q_ existance _A
The abundance of A is defined by
Abundance_A = - Scarcity_A
The effect of offer and demand on scarcity can
be described at follow:
If Q_offert_A > Q_absolute_demand_A than
all the demand is satisfied and Q_absolute_demand_A =Q_demand_A and Scarcity_A < 0 ( Abundance_A > 0)
If Q_offert_A < Q_absolute_demand_A
than Scarcity_A > 0
The preceding definition implies the
following remarks. If there is a complete balance between the offer and demand, goods
have a scarcity equal to zero.
The consequence of differences in scarcity
between goods A and B is that if A has a scarcity higher than B. A can
always be exchanged easily against B whereas B is exchanged against A only
sporadically.
The owner of a scarce good is in an
advantageous position compared to the owner of an abundant good. In possessing a
scarce good, he has the constant possibility to acquire the abundant good with
exchanging the scarce good against the abundant good. The individuals will so prefer
to possess scarce goods to abundant one. Thus, an individual will have the tendency
to exchange scarce abundant goods against scarce ones at each occasion even if he
does not present need for the scarce good. In a economy with only these two
goods, the scarce good will become a reserve of value in other term a currency.
The free market theory stipulates that in a
frictionless economy, a balance between offer and demand tends to be
established so the scarcity of the goods tends to zero. The economic actors are
motivated to adapt themselves in order to produce the scarce goods. Thus, it is
supposed that the population is flexible and ready to change of job according
to the economic requirements.
Let take the example of one of the most
dynamic economy of the world: the United States. People keep their job for an
average of 3 years. The scarcity of the goods tends more quickly towards zero
than in the less flexible economy. The economic rule is that a person who works
on goods with negative scarcity is victim of unemployment (or part time employment)
and seeks to produce goods with a positive scarcity.
In less flexible economy as continental
Europe, the fear of unemployment makes that the people are keen to keep their
job at all price even if this work produces goods with a negative scarcity. Fear
of unemployment is a blocking phenomenon, which explains why the differences in scarcity
between the goods remain.
In our industrial world, two thirds of the
cost of industrial goods is the work of people. Thus, the main limitation to
produce a good is the lack of competent people to produce them. So, a value of scarcity
could be attributed to the competence of the workforce such as:
Scarcity_CompetenceA =
(Q_absolute_demand_CompetenceA - Q_absolute_offert_CompetenceA) /
Q_existance_CompetenceA
In a flexible and open economy, people
adapt their competencies in order to escape from unemployment or to get a
better salary. Thus, the limit of competence of the individuals is their skill
and motivation.
In less flexible economy, companies ask for
diploma or the their recruitment is too arbitrary or too high compared to the
position offer. There is also job protection and the companies (or the
organization) might be forced to keep useless competencies. Employees have also
less motivation to learn more scarce competence to secure our position in the
society. The organization of the society restricts the mobility of the
population. And so, there is a lot of inefficiency in the allocation of the
competencies of people in the society.
In a free market economy, individuals are
the main economical actors. On behalf of their mobility, their dynamism and
their sense of risk, they have the capacity to adapt themselves and to change
of work in order to produce goods with a higher scarcity. They will so profit of
the unbalanced between the offer and demand. As scarcity is relative to one
another, the differential of scarcity tend to be reduce such as the unemployment
tends to zero.
European countries have a lot of social
restrictions. Thus, it exists of very significant variation of scarcity between
individuals. In such context, a liberal policy cannot be sufficient to make the
rate from unemployment falls.
Copyright 2001
Author: Hector Archytas
Keyword: articles on economic scarcity, article on economic scarcity, scarcity, money, monetary, multi, social, society, economy