Exercises: Needs, goods, and scarcity

Explain in your own words what an economic need is and how it differs from a simple want. Give two examples of each related to your life as a student.

Classify the following goods as free or economic goods and justify each decision: the air you breathe in the countryside, a sandwich from the cafeteria, sunlight, a cinema ticket, bottled water, and the school's Wi-Fi.

The diagram summarises the basic economic problem, but one of the boxes is covered with a question mark. State which concept is missing and explain with one sentence what each step of the diagram means.

Explain what it means for a resource to be scarce. Identify three scarce resources in your school (spaces, equipment, someone's time) and describe what decisions each one forces people to make.

Distinguish between physical goods and services, and classify the following: a haircut, a backpack, a dental check-up, a notebook, and the bus journey to school. Justify each classification.

Needs change over time: ask an older person which things in your daily life did not exist when they were your age (mobile phone, internet, wireless headphones). What does that show about the idea that human needs are unlimited?

Water falls free from the sky, and yet tap water is paid for. Explain, using the concepts of free good and economic good, what turns it into an economic good: what work and what infrastructure lie behind the tap.

Time is also a scarce resource. List everything you would like to do on a Sunday and estimate the hours each activity would take: if the total exceeds the hours in the day, explain what basic economic problem you are facing and how you solve it.

The school cafeteria bakes $200$ sandwiches a day and there are $500$ students who would like to buy one for $\text{€}\ 2$.

1. a) Is there a shortage of sandwiches at that price? Justify your answer using the data.
2. b) Propose two different ways of distributing the available sandwiches and explain the criterion used by each.

A family reviews its monthly expenses: rent, streaming platform, food, gym, medicines, and holidays. Classify each expense as a primary or secondary need and reason which ones could be cut with the least cost if their income fell.

Explain why we say that scarcity forces us to choose. Illustrate this with an example of your own where you have $\text{€}\ 20$ and a whole Saturday ahead of you: what options you consider, which one you choose, and what you give up.

The school car park has $40$ spaces and $95$ applications have been submitted.

1. a) Is there a shortage of spaces? Justify your answer using the data.
2. b) Compare three criteria for allocating the spaces (charging a price, holding a lottery, awarding them by seniority) and assess what each one gains and loses.

An NGO receives $500$ packs of school supplies to distribute among $800$ families that have applied. Analyse four ways of handing them out (selling them at a low price, first come first served, a lottery, an income-based criterion) and explain what problem and what advantage each rationing mechanism has.

Train tickets for the December bank holiday weekend sell out weeks in advance and prices rise as the date approaches.

1. a) Explain the relationship between the relative scarcity of seats and the price.
2. b) Why does the same not happen with a good that can be produced without limit, such as an app? Reason out the difference.

A town council organises a free concert in a square with room for $5,000$ people and $20,000$ sign up.

1. a) Is the concert a free good? Justify your answer.
2. b) What allocation mechanisms can be used when there is not enough room? Name two and comment on their effects.

Alex has $\text{€}\ 100$ a month and his wish list (clothes, video games, going out, saving for a trip) adds up to $\text{€}\ 160$.

1. a) What economic concept does that difference illustrate?
2. b) Propose a method for prioritising the list and explain what criterion it uses (need versus want, satisfaction per euro spent).

For years, farmers in a municipality freely irrigated their fields with water from a common aquifer at no cost. After a prolonged drought, the water level drops drastically and the town council decides to limit extraction and charge $0.40\text{ \euro}$ for each cubic metre consumed.

1. a) Justify the transition of water from a free good to an economic good and predict what immediate changes this price will cause in irrigation techniques and crop selection, using the concept of opportunity cost.
2. b) It is proposed to allow farmers with higher-yield crops to purchase part of their water quota from those who grow traditional cereal crops. Analyse the effects of authorising this water rights market on economic efficiency and on equity among the locals.

A technology company states in its advertising campaign: «Thanks to artificial intelligence and solar-powered data centres, the marginal cost of copying and distributing information is zero. Technology has finally defeated scarcity».

1. a) Refute this statement by analysing at least two productive resources essential for sustaining this digital economy (for example, critical minerals for processors, continuous electrical power, or human attention and time) that remain strictly scarce.
2. b) Using the distinction between absolute physical scarcity and relative economic scarcity, explain why an almost infinite abundance of information does not eliminate the economic problem, but rather shifts the opportunity cost to other links in the system.

In a university hall of residence, the dining hall is included in a fixed monthly fee (flat-rate full board). At the end of the term, it is found that $25.0\ \%$ of the food served is thrown directly into the bin.

1. a) Interpret this waste from the perspective of marginal cost for the resident: why does a good perceived as free at the point of consumption alter incentives and generate an inefficient allocation of scarce resources?
2. b) Management is considering two reforms:

• Measure 1: Reduce the fixed monthly fee and charge for each dish individually according to its actual cost.

• Measure 2: Charge a deposit of $2.00\text{ \euro}$ when picking up the tray, refundable only if it is returned with no leftover food.

Predict the incentives and possible perverse effects of each measure, and justify which one you would choose to minimise waste with the lowest management cost.

A study on household expenditure in Ireland shows that families in the lowest income decile allocate, on average, a higher percentage of their budget to mobile telephony and internet connection ($6.8\ \%$) than to footwear and clothing ($4.1\ \%$).

1. a) Based on these data, refute the categorical statement that «secondary needs are merely superfluous inventions created by advertising». Justify how the concept of primary need evolves socially and whether digital connectivity can be considered a basic necessity in a developed economy.
2. b) Analyse the opportunity cost faced by these vulnerable households when prioritising digital spending over other basic consumption, and argue to what extent this choice reflects a sovereign decision or a necessity imposed by the economic structure of the environment.

In the Ria region, irrigation water is paid for with a flat annual fee and the fields waste water; in Vala, it is paid for per litre consumed and water use has fallen by $30\ \%$.

1. a) Explain how the price manages scarcity in each system.
2. b) Analyse the equity problem that charging per litre can create and propose a solution that keeps the saving.

A local district hospital has $3$ daily shifts for non-urgent MRI scans and receives an average of $10$ requests per day, resulting in a four-month waiting list. The management team is debating two proposals to manage scarcity:

• Proposal A: Introduce a deterrent co-payment of $60.00\text{ \euro}$ per scan to eliminate requests with lower clinical need.

• Proposal B: Allocate shifts using clinical triage based on objective points and penalise anyone who does not attend their booked appointment with the loss of their turn.

1. a) Analyse Proposal A by distinguishing between «effective demand» and «real need»: why does rationing a healthcare service solely by price lead to a loss of social efficiency even if it reduces the waiting list?
2. b) In Proposal B, identify the opportunity cost borne by patients while waiting and design an improvement to this system that prevents empty slots from going unfilled without using price as a barrier to access.

The management team at your high school has a margin of $4$ teaching hours per week of flexible allocation and is debating between two incompatible projects due to time constraints:

• Project A: Allocate the $4$ hours to individualized remedial workshops in basic skills for $40$ students at risk of dropping out.

• Project B: Allocate the $4$ hours to an advanced robotics and applied programming classroom for $20$ gifted students.

1. a) Explain this dilemma using the concepts of opportunity cost and production possibility frontier: justify why neither of the two options is technically wrong, but both entail an inevitable sacrifice of value for the educational community.
2. b) Design a rubric with three objective criteria (one for academic efficiency, one for distributive equity, and one for long-term socioeconomic impact) that allow the School Board to justify the final decision in a reasoned manner.

Over the last four decades, the real average income of Irish households has doubled and the industrial production of material goods has become remarkably cheaper. However, the salary effort required to rent or buy a home in the centre of Dublin, Cork and Galway has tripled, and the CAO points required to access the most demanded university courses has reached historic highs.

1. a) Use these data to refute the idea that "economic growth eventually eradicates scarcity." Justify the difference between reproducible material goods and "positional goods" (whose scarcity is structural and relative to status or location).
2. b) Predict what happens to the relative price of positional goods as the average income of a country increases, and analyze how this dynamic affects equality of opportunity between high-income and lower-middle-income families.