1. Generalized Resource Scarcity Monday, April 24

2. Indicators of Scarcity Physical indicators Resource prices Scarcity rent Marginal discovery cost Marginal extraction cost

3. A good indicator of scarcity: Provides foresight Anticipate, not just report Provides comparability Indicate relative scarcity of different resources Indicate which scarcity is more problematic Offers computability Uses readily available or easily obtainable data for calculations

4. Issues for indicators of scarcity: Physical indicators Foresight Comparability Computability Resource prices Foresight Comparability Computability

5. The Bet Biologist Paul Ehrlich and economist Julian Simon $200 investment Copper, chrome, nickel, tin and tungsten

10. Issues for indicators of scarcity: Scarcity rent Foresight Comparability Computability Marginal discovery cost Foresight Comparability Computability

11. Issues for indicators of scarcity: Marginal extraction cost Foresight Comparability Computability

12. Factors Mitigating Scarcity Exploration and Discovery Search for more of a resource until the marginal discovery cost of an additional unit equals the marginal user cost (marginal rent) of the unit D Q $ MEC MEC+MUC P q1 At q1, MUC = P - MEC

13. Factors Mitigating Scarcity Technological Progress Lower cost of extraction More productive processes D Q $ MEC MEC+MUC P

14. Factors Mitigating Scarcity Substitution Substitute abundant resources for scarce ones

15. X Y F 1, Q 1 Fixed-proportion isoquant Q 1 = one (edible) 8” pie crust X = flour Y = shortening Possibilities for Input Substitution

16. X Y F 1, Q 1 Fixed-proportion isoquants Q 2 = two (edible) 8” pie crusts X = flour Y = shortening F 2, Q 2

17. X Y Fixed-proportion production functions: F 1, Q 1 If availability of resource X declines, then the availability of Q necessarily declines. Substitution is not an option for retaining same level of Q.

18. X Y S 1, Q 1 Q 1 = one pint of salad dressing X = oil Y = vinegar

19. X Y S 1, Q 1 Substitutability in production: If the availability of resource X declines, the availability of Q may not be affected. Substitution of Y for X may allow for retaining same level of Q.