Scarcity and rivalry | Basic Economic Concepts | Microeconomics | Khan Academy

Scarcity and rivalry | Basic Economic Concepts | Microeconomics | Khan Academy

– [Instructor] What we’re going to do in this video is talk
about two related ideas that are really the
foundations of economics, the idea of scarcity
and the idea of rivalry. Now, in other videos, we do a deep dive into what scarcity is. But just as a review,
in everyday language, you could think of something is scarce, a good or a service is scarce if there’s not enough for everyone. Another way to think about it is a scarce resource is one that is limited. It is a limited resource, and there’s not enough to go around because there are potentially
unlimited wants from people, so potentially, potentially unlimited, unlimited wants. And we could think of a
lot of scarce resources. Oil would be a scarce resource. There’s a limited supply of oil. And potentially, if oil were free, there’s an unlimited amount of people who would want to use that oil. And so a lot of economics is, well, when you have a scarce resource, like oil or land or housing, how do you allocate those
resources amongst people, people who are demanding those resources? Now, rivalry is a related idea. When we think about the
everyday word rival or rivalry, you imagine multiple parties
competing for something, and that’s essentially
getting pretty close to the economics definition of it. Something is a rival
good or a rival resource, I’ll just call it a rival good right now, if, when one person uses it, it limits the ability for
other people to use it. So one, one person consuming it or using it, consuming it limits ability, ability for others, for others to use. And there’s a lot of
examples of rival goods and things that are both
scarce and rival goods. For example, if I were to
put a nice, delicious cake that could only serve
four people in our office here at Khan Academy, where
we have 80 or 90 folks work, well, you can imagine, that
cake’s going to be a rival good. It’s also a scarce good
because many people, many more people are
gonna want that cake than the amount of cake we have. But when you look at what the
definition of a rival good is, every time I, if I eat the whole cake, that’s going to limit other
people’s ability to use it. And economists will sometimes
create a spectrum of how rivalrous a good is. So, for example, let me draw
a spectrum right over here. So on this line, so on the left-hand side, I
will call this highly rivalrous, which is, they’ll actually use that word, but I’ll just call this rival goods. And then at the other
extreme here, I’ll say non, non-rival, non-rival good. And at the left end, it’s pretty easy to come up
with a bunch of rival goods. If you’re living in a place
where housing is tight, where all of the housing is taken up, housing is often a rival good. I live in the San Francisco Bay Area. And when a house goes on rent,
you’ll have multiple people who are competing for that
house, or if it’s going for sale. And so when one person gets
it and gets to live there, well, that’s going to make it hard for other people to use it. You could imagine, you know, land in a lot of urban areas is a rival good. You could imagine something
like, you know, a cake, especially if there’s not
a lot of cake to go around at a birthday party. Now, what would be the other extreme? What would be a non-rival good? Well, there are very few
perfectly non-rival goods, but there are things that are close to it. Because at least relative
to where people’s, where people are trying to use it today, it seems like there’s almost
an unlimited supply of it. One example might be
something that’s close. I’m not gonna put it
all the way at the end. I’m gonna put air, air to breathe on Earth. Now, right now it’s a non-rival good. When I take a deep breath,
it doesn’t make it hard for you to take another
simultaneous deep breath. And actually, let me put
a little qualifier here, simultaneously, simultaneously. That’s actually a key
qualifier for a rival good. So, for example, a hammer
is also a rival good. Because if I’m using it right now, it becomes very hard for you
to use it simultaneously. Now, as I mentioned, air to breathe, if I take a deep breath right now, it doesn’t make it any harder
for you to take a deep breath. But if you were to take a
extreme circumstance that, let’s say that if we were in a closed room with a limited supply of
oxygen, well, then the air might become something
closer to a rival good. So let me put it this way,
air to breathe outside, while here I’ll put air in airtight, or let me put oxygen
in an airtight container or airtight room, oxygen in airtight room or maybe a room that
is running out of oxygen. Well, then every time I take
a breath, it’s gonna make it harder for you to take
a breath and vice versa. There’s other things like,
well, roads are rival goods, especially if we’re
talking about rush hour. So let me put this right over here. So let’s call this the
roads during rush hour, roads during rush hour. The more people that are on the roads, that it’s gonna make it harder for other people to use it simultaneously. It will get all this traffic. People won’t even be able
to get on the highway ’cause there’s so much gridlock. But then you could imagine roads in the middle of the
night are non-rival goods. If I decide to take a drive at three in the morning on most highways, it doesn’t make it any
harder for another person to take a drive on that
highway simultaneously. So let me put it over here, roads, roads at 3:00 a.m. in most places is closer
to being a non-rival good. So I will leave you there. These are ideas that we’re going to keep revisiting in economics. But it’s good to have a
sense of what they mean, and then it’ll inform how we think about allocating these scarce
goods amongst folks and thinking about how we allocate these rival goods amongst various parties.

10 thoughts on “Scarcity and rivalry | Basic Economic Concepts | Microeconomics | Khan Academy

  1. Are roads really rival goods? 5:36 …let's talk about the volume of traffic — ie, number of people or cars — as a function of speed†, perhaps? That's like increasing the supply. Conversely, when the speed is decreased artificially, either by speed limit or by an accident, then the number of people and cars who can use the road will be reduced.
    ( † and following distance — which is best measured as time, such as a number of seconds between cars, rather than distance.)

  2. Learning economics was interesting ,i also learned about the four factors of production .Now I am an enterpreanuer to work on construction area and I am also an Economist ,but i need to learn economics and to specialize on.i follow you on my twitter page .thank you

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