Undercover Economist What I Learned Term Paper

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But how does this scarcity principle translate into conditions other than droughts and produce surpluses, or the pricing decisions of marketers in the general world economy? Take a local movie theater, where an artificially induced scarcity of other food products allows the movie theater to charge more for popcorn and soda, or a bar or a restaurant to charge more for wine.

In areas with high levels of tourist foot traffic, the principle of scarcity can also be induced, even though theoretically tourists could gravitate to other areas to eat. Because tourists don't know where to find good restaurants that are cheap, they tend to eat at the first place where they can find a table, near tourist attractions. Good restaurants don't locate to these areas, because even if they are able to charge high prices, they won't draw in the sort of local clientele that wishes to sample higher-end cuisine.

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Thus, while it is generally true that scarcity drives up the price of a good, a canny marketer can create scarcity, even when there really are other options.

The principles of economics even demonstrate why it is impossible to buy a decent used car. Because cars are expensive, people tend to hold onto them as long as they possibly can, thus the market for used cars is full of lemons. And even if a person has a good used car, it is difficult to charge a high price for it, because of the general market conditions people tend to assume that something must be wrong with the car. Thus, from the frustrations of the grocery store, the movie theater, the toy store, and the local used car market, Harford explains that it's not your bad luck -- it's just the way the economy works (or doesn't).

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