Scarcity in economics refers to goods and resources that are limited and not freely available for people to obtain. Goods are traded on the market for a certain price depending on their scarcity and value. Goods like these are called economic goods. Jewelry, computers, cars and food have varying levels of scarcity and value that affects their prices. On the other hand, there are goods that are free for everybody, whether we need them or not. These goods are referred to as free goods.
The Supply Far Exceeds the Demand
Free goods exist in large quantities that satisfy the needs of everyone for them. Thus, there is no scarcity of these goods and subsequently, no need to ration them out among the people. Breathable air is a very important resource for our survival. The quality may differ according to location, but it exists everywhere and is available for people to breathe in.
They are Readily Available
An oversupply of goods is not enough to qualify them as free goods. The goods must always be readily available as well. Fresh water is drinkable and used for activities such as cleaning, making it valuable for our survival. People living beside a lake wouldn't have to worry too much about its availability. They always have access to it whenever they need it, thus making fresh water a free good. But for people living in harsh deserts, the only time they'll have access to water is when they reach an oasis or during those rare moments of rainfall. Fresh water is something that they would prize and pay a good amount of money for. In this instance, fresh water ceases to be a free good.
The Market Price is Zero
A consequence of the first two characteristics: because free goods are in abundance and readily available, people are able to obtain them for free. There is no price to pay for breathing air and no one can make you pay for breathing it in. Because people are able to get these goods for no cost, there is no value in trading these goods. As a result, their price in the market would be equal to zero.
They May or May Not Have Value for People
Just because a good is free does not mean it is of no value or utility to people. Breathable air is still a critical resource for our survival and it is fortunate for us that it is abundant, available and free. The same may not be said of seawater. Though there are studies that examine the possible use of seawater in industries like agriculture and aquaculture, its undrinkability makes this resource of no value to many people.
- "Economics"; Paul Samuelson, Ph.D. and William Nordhaus, Ph.D.; 2010
- "The Freeman"; The Economic Way of Thinking: Part 1; Ronald Nash; October 1993
- Stanford Solar Center; Ideas on the Use of Seawater Irrigation/Agriculture for Energy, Global Warming, Land, Fresh Water, Food & Minerals
Emmanuel Espejo started writing professionally in 2008. He has written English subtitles for the Filipino television show, "Kahit Isang Saglit," and has also written for "Docusiyensya," a science digest for students. Espejo is pursuing a Bachelor of Arts in journalism from the University of the Philippines.