1-Explain the differences between shortages and scarcity. In answering this question you should consider the difference between the short run and the long run in economic analysis.
2-Briefly list and elaborate on the factors that will be affecting the supply of the following products in the next several years. Do you think these factors will cause the supply to increase or decrease?
a) Crude oil
c) Computer memory chips
d) Hotel rooms
e) Fast food outlets in emerging markets
f) Credit cards issued by financial institutions
g) Laptop computers
h) PC servers
Olivia (2011) describes shortages as "man-made in the sense that producers or sellers are not willing to offer goods or services at current prices. These shortages vanish after a price hike. On the other hand scarcity refers to a situation when the commodity is actually in limited quantities that cannot meet the unlimited demands of the people".
The short run and long run concepts do not refer to a particular time or period.
The short run is a period of time in which the quantity of at least one input is fixed and the quantities of the other inputs can be varied. The long run is a period of time in which the quantities of all inputs can be varied (Mike Moffatt).
In the short-run, firms cannot enter or exit the market and there is at least on fixed factor. In the long run, entry and exit is possible and there are no fixed factors (everything is variable) (AdvancedEcon, , 2011).
Factors that will be affecting the supply of the identified products in the next several years. Do you think these factors will cause the supply to increase or decrease?
a) Crude oil
Sustaining the price of oil in the world market will result to ...
The solution discusses the difference between shortage and scarcity, the short run and the long run in economic analysis. It also identifies what will be the supply behavior of the different products -- Crude oil, Beef, Computer memory chips, Hotel rooms, Fast food outlets in emerging markets, Credit cards issued by financial institutions, Laptop computers, and PC servers in the coming years.