Difference between revisions of "Artificial scarcity"

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'''Artificial scarcity''' describes the [[scarcity]] of items even though the technology and [[Economic production|production]] capacity exists to create an abundance.  The term is aptly applied to non-rival resources, i.e. those that do not diminish due to one person's use, although there are other resources which could be categorized as artificially scarce.  The most common causes are [[monopoly]] pricing structures, such as those enabled by [[intellectual property]] rights or by high [[fixed costs]] in a particular marketplace.  The inefficiency associated with artificial scarcity is formally known as a [[deadweight loss]].
 
'''Artificial scarcity''' describes the [[scarcity]] of items even though the technology and [[Economic production|production]] capacity exists to create an abundance.  The term is aptly applied to non-rival resources, i.e. those that do not diminish due to one person's use, although there are other resources which could be categorized as artificially scarce.  The most common causes are [[monopoly]] pricing structures, such as those enabled by [[intellectual property]] rights or by high [[fixed costs]] in a particular marketplace.  The inefficiency associated with artificial scarcity is formally known as a [[deadweight loss]].
  
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With nearly all goods, a trade-off occurs when decisions are made about production.  The graph{{which?|date=May 2012}} shows the economic anomaly that occurs with artificially scarce products.  Because leather boots consume resources, a trade-off is noticed between running shoes and boots; i.e. in order to produce more boots one has to produce fewer running shoes because of limited resources.  This trade-off is illustrated by a move from P1 to P2 in the Production Possibilities graph on the left.
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With computer software, no significant trade-off occurs.  To produce more of a certain piece of digital information, since virtually no resources are used to copy the information there is no trade-off with the production of other things, like shoes and boots.
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With computer software, no significant trade-off occurs.  To produce more of a certain piece of digital information, since virtually no resources are used to copy the information there is no trade-off with the production of other things, like shoes and boots. In essence, problems of artificial scarcity usually arise when a good that was once scarce becomes abundant due to extreme increases in productivity and technology.<ref>{{cite web |url=http://www.automation.com/resources-tools/articles-white-papers/articles-by-jim-pinto/the-problems-of-scarcity-abundance |title=The Problems of Scarcity & Abundance |publisher=Automation.com}}</ref>
 
  
  
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== Economic actions that create artificial scarcity ==
 
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{{Unreferenced section|date=June 2012}}
 
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* [[Cartels]]
 
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* [[Copyright]] - Grants authors a limited monopoly to copy and distribute their works.
 
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These actions are used to artificially prevent [[market failure]], artificially preserve profits for producers, or artificially reduce costs for a certain group.
 
  
 
== See also ==
 
== See also ==

Revision as of 04:35, 8 October 2012

  1. ↑ Phi Kappa Phi (1952). Phi Kappa Phi journal. Honor Society of Phi Kappa Phi.
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