2 discussion questions 37

Question 1:

Scarcity is the starting point for studying economics. Resources are limited while human wants are unlimited. Prior to beginning work on this discussion, read Chelsea Follett’s article, Are Humans Prepared to Overcome Resource Scarcity in the Future? ,(POSTED BELOW) as well as Chapter 1 Section 1.2 in your textbook, and respond to the following:

• Explain what resources are.
• Evaluate why current resource scarcity is problematic.
• What future problems would result from scarce resources?
• Do you agree or disagree, and why, with Chelsea Follett about overcoming future resource scarcity?

Recommend how to overcome present and future resource scarcity.

Your initial post should be a minimum of 300 words.

Human civilization is very well equipped to overcome resource scarcity in the future, if we can correctly identify, preserve, and expand those policies and institutions that made overcoming resource scarcity possible in the past. Please read this answer to a previous question for a summary of the kinds of horrors that can occur when people mistakenly come to believe that the only solution to resource scarcity is to reduce the size of the population. History has shown that even as the population grows, humanity is perfectly capable of making resources more plentiful by using them more efficiently, increasing their supply and developing substitutes.

Population growth can certainly be a problem among nonhuman animals: population explosions among, for example, rabbits, can lead to an exhaustion of natural resources in their environment and eventually a population collapse. But human beings, unlike other animals, create wealth, engage in complex exchange and innovate their way out of scarcity. That was the great insight of economist Julian Simon.

Simon, in his 1981 book The Ultimate Resource, argued that the premise that “overpopulation” is a problem at all is incorrect. More people in the world means more people to solve problems, and less resource scarcity. As he wrote: “For all practical purposes there are no resources until we find them, identify their possible uses, and develop ways to obtain and process them. We perform these tasks with increasing skill as technology develops. Hence, scarcity diminishes.”

Human beings, with their inventive potential, are themselves, in Simon’s phrase, “The Ultimate Resource.” Each child born today eventually grows up to make resources less scarce, on average, by contributing to innovation and the global economy. Simon argued a growing population produces more ideas. More ideas lead to more innovations and more innovations can improve productivity. That higher productivity then translates into more resources to go around and better standards of living.

Of course, that only holds if people maintain the freedom to innovate and exchange. If that freedom is not present, then a return to scarcity is very possible. Just look to Venezuela to see how quickly prosperity can unravel and resources that were once plentiful can become scarce, when economic freedom is denied.

The future will undoubtedly bring new challenges related to resources. But there is no obvious reason why, given the right policies, growth cannot continue indefinitely—particularly as technology advances. Humanity may one day even gain access to resources beyond the Earth’s limits, such as by mining valuable minerals in asteroids.

Question 2

A change in quantity demanded (or a movement along the demand curve) is caused by a change in its own price while a change in demand (or a shift of the demand curve) is caused by a change in nonprice determinants that include changes in consumers’ income, taste or preference, price of other goods, expected future price, etcetera. Respond to the following:

• If Coke’s price increases, what will happen to the demand or quantity demanded for Pepsi, all other things being equal?
• Explain whether it is a movement along the demand curve or a shift of the demand curve.
• If Coca-Cola develops a new technology that makes Coke tastier, what will happen to the supply curve and demand curve for Coke?
• Is the demand (curve or schedule) for Coke or Pepsi seasonally different?

What is the relationship between Coke and Pepsi? Do they have the same demand curve or are they different? Explain your reasoning.

Your initial post should be a minimum of 300 words.

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