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January 24, 2018 

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ADJUSTMENT, SHORT-RUN AGGREGATE MARKET: Disequilibrium in the short-run aggregate market induces changes in the price level that restore equilibrium. If the price level is above the short-run equilibrium price level, economy-wide product market surpluses cause the price level to fall. If the price level is below the short-run equilibrium price level, economy-wide product market shortages cause the price level to rise. In both cases short-run equilibrium is restored. You might want to compare adjustment, long-run aggregate market. Price level changes induce changes in both aggregate expenditures and real production. Unlike the long-run aggregate market, changes in the price level can induce changes in short-run aggregate supply, making it greater or less than full-employment real production.

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SCARCE GOOD:

A tangible item produced with society's limited resources for the purpose of satisfying wants and needs. As a general notion, the phrase scarce good can also commonly include intangible services produced with society's limited resources for the purpose of satisfying wants and needs. A synonymous term for scarce good is economic good.
Adding the word "scarce" before the word "good" signifies that a good has limited availability relative to desired use and is thus subject to economic analysis. A scarce good is typically exchanged through a market. Buyers pay a price to obtain the good and sellers give up the good in exchange for payment.

Scarcity

As the name suggests, a scarce good is closely related to the fundamental problem of scarcity. Scarcity is the widespread condition of limited resources and unlimited wants and needs. A scarce good is more specifically a good with limited availability relative to desired use. Scarcity is the general problem underlying the study of economics and a scarce good is a specific good that reflects this general scarcity condition.

The contrasting notion to a scarce good is a free good. A free good is one that is plentiful enough to satisfy all desires uses, often with some left over.

Market Exchanges

Because limited availability means that a scarce good has more uses that it can meet, it is generally exchanged through a market. The market price serves to allocate the good to its most satisfying and valuable uses. Users gaining the greatest benefit from the scarce good are willing to pay the highest price and can thus out bid other potential users to gain control. Moreover, payment received by those who produce or otherwise have control of the scarce good compensates for the opportunity cost of foregone alternatives.

Scarce Resource

The word "scarce" is also added to the word "resource" to reflect a similar concept. The difference is that a scarce resource is used to produce a scarce good. The resource is transformed or used for production and the good is then used to provide satisfaction. However, in both cases the item is limited relative to the desired use.

More than Markets

Although most scarce goods are traded through markets, some are directly produced or provided by government. In addition to limited availability relative to desired use, the market exchange of a scarce good also requires rival consumption and nonpayer excludability. Scarce goods that do not have rival consumption and/or nonpayer excludability are termed public goods, near-public goods, or common-property goods. But they are scarce goods nonetheless.

A Word About Shortages

At first glance, a market shortage would seem to be the primary source of a scarce good, that the two are one and the same thing. A closer look, though, reveals otherwise. A shortage depends on the existing market price. If the market price is below the equilibrium price, then the quantity demanded exceeds the quantity supplied AT THE MARKET PRICE, and a shortage results. However, at a different price, the shortage vanishes. In contrast, a scarce good exists if the desired use exceeds the available quantity at a ZERO price. While a scarce good might experience a shortage, it can also experience a surplus, if the price is such that quantity supplied exceeds quantity demanded.

<= SCARCESCARCE RESOURCE =>


Recommended Citation:

SCARCE GOOD, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: January 24, 2018].


Check Out These Related Terms...

     | good | service | economic resource | economic good | scarce resource | free good | free resource |


Or For A Little Background...

     | scarcity | allocation | three questions of allocation |


And For Further Study...

     | seven economic rules | consumer sovereignty | ownership and control | economic analysis | production | production possibilities | opportunity cost | satisfaction | rationing | production cost |


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