Answer to Question #176799 in Economics for Tsakani Basani

Question

Write an eassy on production is needed to solve the scarcity problem. Identify the scarcity problem and discuss the different factors of production in detail.

Answer 1

The deficit is a discrepancy between the supply of goods and demand. It arises under conditions of strict price regulation, monopolization of production, underdevelopment of the financial market. In most markets (food, furniture, clothing, home appliances and electronics, decoration materials, and so on), sellers have inventory. For example, if we are talking about a store that sells food products, then it is obvious that the store will have a warehouse stock of these products. However, there are exceptions. Stocks are not possible in service markets - in hairdressing salons, laundries, and the like. Returning to the topic of scarcity, let's consider the possible factors by which we have disgruntled buyers, nervous sellers and the lack of goods in stock:

1. Unbalanced price (demand outstrips supply). Scarcity usually indicates a low supply caused by a low price. “Snapped up like hotcakes,” we say, implying that the goods leave quickly. Too fast. So fast that we can't keep up with the increased demand. A prime example is a merchandise during sales. A discount of up to 50% has been announced, and as a result, people are pouring into the store, buying everything that has yellow price tags. Who doesn't want to buy candy at half the price? However, the price is not always the only reason for the deficit.

2. Errors in planning purchases and sales analysis. As a rule, this reason lies in people who, for some reason, do not do their job well. Perhaps they are not trained, perhaps they do not see the connection between the purchased and the sold product. One way or another, without serious analysis of sales and without precise planning, the company quickly gets an unbalanced stock.

3. Changes in the current market situation (the emergence of a new fashion, trend, law). A familiar picture, isn't it? Just yesterday, the hole in the jeans seemed like a disaster. And today, young shoppers go around shops in search of the most torn and shabby goods. A new trend towards healthier lifestyles is forcing buyers to ask and sellers to rush to fill warehouses with items labeled "0 calories" or "low fat" or "soy-free." If yesterday a new law was adopted stating that all children under 12 years old must be transported only in a child car seat, then there is a possibility that such car seats will suddenly begin to be in increased demand.

4. Active advertising or PR campaign. Case in life: “We have a regular store selling many products from different manufacturers. Suddenly, buyers begin to actively ask "the yogurt that is in the advertisement." We have never sold it so actively! We begin to understand, and we see that the manufacturer has launched active advertising on television and in family magazines. I wanted to make a surprise for us. If we knew about this action in advance, of course, we would have prepared and increased the stock of this yogurt... ”. In our country, people trust advertising and actively buy the advertised product. Therefore, such a "surprise" attack on the consumer leads to nothing but problems and scarcity.

5. Logistic problems. The item can be ordered correctly. The correct price can be set on it. It is being advertised correctly. But if for some reason it is not delivered to the warehouse or is late to the store, there is a high probability of being in a state of shortage. This is especially true for perishable goods (meat, fish, dairy products, bread), where one day of delay can reject the entire batch. If instead of the planned two days, the cargo moves to the store for four days, then all ideal planning comes to naught - the store gets two days of work with empty shelves. Sometimes this is enough to lose many regular customers and earn the image of a store "where there is never anything".

6. The goods are ordered without regard to complexity. There is a product whose sales affect the sales of another - for example, champagne and candy, flour and yeast, green peas, and mayonnaise. In such a case, the qualifications of the manager who draws up the purchase order can be critical. “In our company, orders for beer are taken by one manager, and another is responsible for snacks, chips, crackers, and nuts. The trouble is, they operate separately from each other. As a result, we get chips, but the beer has not arrived yet ... ”. A shortage of one product makes it difficult to sell another.

7. Social and environmental factors. Weather, ecology, epidemics can provoke an unexpectedly high demand for a product. If the summer is very hot, then the demand for ice cream and soft drinks may exceed the supply several times. An unexpected water cutoff in the area provokes a demand for bottled water. During the SARS epidemic, the demand for respirators in China jumped dozens of times! This deficit is in the nature of an outbreak and ends as abruptly as it begins.