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When purchasing a vehicle how can scarcity play a role?

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cllawrence | Honors

Posted July 7, 2013 at 12:53 PM via web

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When purchasing a vehicle how can scarcity play a role?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted July 7, 2013 at 1:28 PM (Answer #1)

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Scarcity plays a role in every aspect of our lives.  It is the basic reason why economics exists.  Scarcity exists at all times and in all circumstances because we human beings have unlimited wants and must try to fulfill these wants using limited resources.  This forces us to make decisions about what things we will try to get or do.

In purchasing a car, scarcity applies in at least two ways.  First, the fact that the car has a price is caused largely by scarcity.  Because steel and glass and rubber and computer components are not unlimited, and because they could be used for other things, car manufacturers have to pay money to get them.  Because human labor is not unlimited manufacturers and sellers must pay to get it.  This causes the car to have a price.  Second, there is the fact that we have scarce money and unlimited things on which we would like to use it.  We must, when purchasing a car, decide how much of that money to use.  Do we want to use a lot of money and get a fancy new car?  Do we want to use only a little of it (relatively) and get a less desirable car so we have the money for other uses?  This, too, is a decision forced upon us by scarcity.

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