1. Rationing in a World of Limited Resources

2. The Problem of Scarcity Scarcity - Limited quantities of resources to meet unlimited wants. If goods are scarce, they must be rationed. –Rationing is a system of allocating scarce goods and services according to certain criteria. Ex. Physical prowess, public esteem, age, need, merit, willingness to pay money, etc.

3. Competition & Price Competition is the result of scarcity. –Individuals striving to meet the criteria used to ration goods. Price - society rationing on the basis of a willingness to pay money. –Individuals will work to earn money and those that are able and willing to pay the price will receive the good.

4. Price as a Rationing Device When goods are scarce, consumers compete against each other to obtain the good. –Result Prices increase!! –Price serves as an important rationing device in market economies and a signal for economizing. What happens when price controls are implemented?

5. Other Rationing Methods When prices are fixed, we must develop other criteria for rationing –Need –First come, first served –Lottery, equal share for all –Merit Can you think of any others??