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EQUILIBRIUM PRICE: The price that exists when a market is in equilibrium. In particular, the equilibrium price is the price that equates the quantity demanded and quantity supplied, which is termed the equilibrium quantity. Moreover, the equilibrium price is simultaneously equal to the both the demand price and supply price. In a market graph, like the one displayed here, the equilibrium price is found at the intersection of the demand curve and the supply curve. The equilibrium price is also commonly referred to as the market-clearing price.

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SCARCE RESOURCE:

A resource with an available quantity less than its desired use. Scarce, or economic, resources are also called factors of production and are generally classified as either labor, capital, land, or entrepreneurship. Scarce resources are the workers, equipment, raw materials, and organizers used to produce scarce goods. Like the more general society-wide condition of scarcity, a given resource falls into the scarce category because it has a limited availability in combination with greater (potentially unlimited) productive uses.
Adding the word "scarce" before the word "resource" signifies that a resource has limited availability relative to desired use and is thus subject to economic analysis. A scarce resource is typically exchanged through a market. Buyers pay a price to obtain the resource and sellers give up the resource in exchange for payment.

Scarcity

As the term suggests, a scarce resource can be traced to the fundamental problem of scarcity. Scarcity is the widespread condition of limited resources and unlimited wants and needs. A scarce resource is more specifically a resource with limited availability relative to desired use. The two concepts are closely related. Scarcity is the general problem underlying the study of economics and a scarce resource is a specific resource that reflects this general scarcity condition.

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

Market Exchanges

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

Scarce Good

The word "scarce" is also added to the word "good" 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.

Factors of Production

Another, more common, name for scarce resources is factors of production--labor, capital, land, and entrepreneurship. Labor includes the mental and physical human efforts. Capital includes machinery, equipment, buildings, and structures. Land includes naturally occurring raw materials. Entrepreneurship includes the risk-taking organizers of production.

A Word About Shortages

At first glance, a market shortage would seem to be the primary source of a scarce resource, 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 resource exists if the desired use exceeds the available quantity at a ZERO price. While a scarce resource might experience a shortage, it can also experience a surplus, if the price is such that quantity supplied exceeds quantity demanded.

<= SCARCE GOODSCARCE RESOURCES =>


Recommended Citation:

SCARCE RESOURCE, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: July 20, 2018].


Check Out These Related Terms...

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