Allocating Scarce Resources Chpt 1 Allocating Scarce Resources

Allocating Scarce Resources Chpt 1

Allocating Scarce Resources Have you ever had an difficulty getting the things that you want?

Allocating Scarce Resources Why can’t you have everything that you want?

Allocating Scarce Resources

Allocating Scarce Resources Can you think of anything that isn’t scarce? What things are scarce? How do you know these things are scarce?

Allocating Scarce Resources What is “allocating”?

Allocating Scarce Resources Allocate = process by which a community distributes scarce goods and services. What are some ways this is done in the US? Since everyone can’t have everything that they want, what should be the goal of any allocation method?

Individuals and Societies Must Devise Ways to Deal with This Problem How can we effectively allocate scarce items? • Rationing • Lottery • Achievementbased • Need-based • Brute force • First come, first served • Appearance

Allocating Scarce Resources • • Rationing Lottery Achievement-based Need-based Brute force First come, first served Appearance Think about scenarios in which each of the allocation methods might be used. In your groups, wrote down as many examples for your assigned method as you can think of—no idea is too crazy.

What Are Some Examples of These Forms of Allocation? Rationing – wartime, OPEC oil crisis, sales Lottery – sporting-event tickets, prizes, unpleasant tasks Achievement-based – contests, college admissions Need-based – means-tested welfare, medical triage Brute force – war First come, first served – “Black Friday, ” organ transplant Appearance – nightclub entry

Allocating Scarce Resources Who benefits from each method?

Allocating Scarce Resources Ex) Rationing = broader distribution Lottery = removes subjectivity Achievement-based = rewards hardest worker Need-based = responds to those perceived to be suffering the greatest hardship Brute force = rewards strong First come = rewards those at top of list Appearance = rewards attractive (by someone’s standard)

Markets Typically Allocate Resources Based on Price and the Ability to Pay

Allocating Scarce Resources Pricing mechanism—provides a rationing function Shortage = prices go up Surplus = prices go down Higher prices send a signal to increase output Lower prices suggest it’s time to cut back on production. W/out central pricing authority, market and pricing mechanism serve as a regulating device to equate demand w/ supply

Should There Be a Market for Kidneys? • 4, 720 people died in 2012 while waiting for kidney • • transplants in the United States. In each of the past five years, more than 2, 600 kidneys were recovered from deceased donors and discarded without being transplanted. For 25 years, the waiting list for deceased-donor kidneys, currently 93, 413, has remained stubbornly rooted in a federal policy that amounts largely to first come, first served. Source: http: //www. nytimes. com/2012/09/20/health/transplant-experts-blame-allocation-system-fordiscarding-kidneys. html? pagewanted=all&_r=0

Dialysis Machine Time http: //www. tutor 2 u. net/blog/images/uploads/Economics_ 1 st_lesson. pdf

Should There Be a Market for Kidneys? Watch the following video clip of a “Law and Order” episode: http: //www. criticalcommons. org /Members/economicstube/clips/s vukidneybrighter. wmv After watching the video clip, answer the following questions: 1. 2. Would the transplant process be more efficient if people could buy and sell organs? Explain. Is it ethical to trade in organs, and what would be the negative consequences of this market?

What Is Price Gouging? Price gouging occurs when merchants artificially raise the price of consumer goods that are in an emergency or natural disaster. The definition of price gouging is not settled in some jurisdictions.

Legal Definitions Vary Virginia & Tennessee Price gouging is an “unconscionable” or “unreasonable” price hike. The exact definition of those terms is then left to the discretion of the Attorney General in the first instance, and then to a judge or jury if a case is tried. Arkansas & Alabama Arkansas follows a more strict approach, prohibiting price increases above 10% for storm recovery products. Meanwhile, Alabama allows for higher price hikes; it only prohibits raising prices above 25% of the average price for the previous 30 days.

Blue States Have Laws in Place States with Anti-Price Gouging Laws FPO

Homework Read “We Can’t Stop the Twisters, but We Can Stop Price Gouging” and answer questions in your notebook Read “What’s Wrong with Price Gouging” and answer questions in your notebook