An introduction to the concepts of scarcity, choice, and opportunity cost. Scarcity and rivalry. If all land is homogeneous but demand for land exceeds its supply, the entire land will earn economic rent by virtue of its scarcity. In general, the less plentiful things are relative to demand—whether buildable land, MarkMcGwire home run balls, or New York taxi medallions—the higher the scarcity rent. The scarcity of jobs in the town has caused the crime rate to increase dramatically. Scarcity rent is the price of land owing to its shortage, rather than to any particular quality of the land. Seasonal offers are used to create scarcity and encourage sales because seasons and holidays don’t last that long. Scarcity rent is an opportunity cost, appropriated by owner of resource. Because of the scarcity of apartments in the city, the rental rates are quite high. Introduction to economics. Scarcity. Failures P Externalities Harbor: port + resort hotel Port uses harbor for waste Resort hotel wants clean water (no pollution control, damage) Q MC P MC S D What leads to this? The rent money she pays for a factory to produce her beverage line is an example of capital resources/ land/labor/ capital Which of these statements demonstrate the economic concept of scarcity? Prof. Actually, this is the reason stores such as Starbucks offer pumpkin-flavored products during the fall. It undertook research that showed that revenues from flights to a number of destinations from Heathrow greatly exceeded those from similar flights from Gatwick. The Mona Lisa, for example, has a high scarcity rent because it is much sought after, and there is only one original. Lesson summary: Scarcity, choice, and opportunity costs. This minimum payment is known as TRANSFER EARNINGS and it represents an OPPORTUNITY COST.Thus, for example, a person might just be willing to work as a lecturer for a minimum of £1,000 per month because he could earn this amount working in … significant scarcity rent. MUC = marginal user cost MEC = marginal extraction cost scarcity rent MUC MEC + MUC = P MEC D Q 2. Email. Introduction to economics. Scarcity rent Continuing the two period example and considering only the first period, scarcity rent is given by the following graph. The housing market is a good example of how supply and demand works within an industry. Four factors of production. Scarcity Rent. In this way, rent will arise when supply of land is inelastic. For example, at Starbucks, pumpkin-flavored drinks go for $7.81, which is slightly higher than the usual price of $6.67. Key Idea: Scarcity rent is producer surplus … Producer surplus is given by both areas because you don't actually pay for marginal user cost. 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