Generalized Resource ScarcityIndicators of ScarcityA good indicator of scarcity:Issues for indicators of scarcity:The BetSlide 6Slide 7Slide 8Slide 9Slide 10Slide 11Factors Mitigating ScarcitySlide 13Slide 14Slide 15Slide 16Slide 17Slide 18Slide 19Generalized Resource ScarcityMonday, April 24Indicators of ScarcityPhysical indicatorsResource pricesScarcity rentMarginal discovery costMarginal extraction costA good indicator of scarcity:Provides foresight•Anticipate, not just reportProvides comparability•Indicate relative scarcity of different resources•Indicate which scarcity is more problematicOffers computability•Uses readily available or easily obtainable data for calculationsIssues for indicators of scarcity:Physical indicators•Foresight•Comparability•ComputabilityResource prices•Foresight•Comparability•ComputabilityThe BetBiologist Paul Ehrlich and economist Julian Simon$200 investment Copper, chrome, nickel, tin and tungstenIssues for indicators of scarcity:Scarcity rent•Foresight•Comparability•ComputabilityMarginal discovery cost•Foresight•Comparability•ComputabilityIssues for indicators of scarcity:Marginal extraction cost•Foresight•Comparability•ComputabilityFactors Mitigating ScarcityExploration and Discovery•Search for more of a resource until the marginal discovery cost of an additional unit equals the marginal user cost (marginal rent) of the unitDQ$MECMEC+MUCPq1At q1, MUC = P - MECFactors Mitigating ScarcityTechnological Progress•Lower cost of extraction•More productive processesDQ$MECMEC+MUCPFactors Mitigating ScarcitySubstitution•Substitute abundant resources for scarce onesXYF1, Q1Fixed-proportion isoquantQ1= one (edible) 8” pie crustX = flourY = shorteningPossibilities for Input SubstitutionXYF1, Q1Fixed-proportion isoquantsQ2= two (edible) 8” pie crustsX = flourY = shorteningF2, Q2XYF2, Q2Fixed-proportion production functions:F1, Q1If availability of resource X declines, then the availability of Q necessarily declines.Substitution is not an option for retaining same level of Q.XYS1, Q1Q1= one pint of salad dressingX = oilY = vinegarXYS1, Q1Substitutability in production:If the availability of resource X declines, the availability of Q may not be affected. Substitution of Y for X may allow for retaining same level of
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