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Video transcript

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 and everyday language you could think of something as 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 purse 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 codes and things that are both scarce and rival goods for example if I were to put a nice delicious cake can only serve four people in our office here at Kahn Academy where we have 80 or 90 folks work well you can imagine that Cakes going to be a rival good it's also a scarce good because many people many more people are going to want that cake than the amount of cake we have but when you look at what the definition of a rival good is it 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 rival risk 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 rival risk 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 nan nan rival nan arrival 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 so I'm taneous Lee 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 well here I'll put air in air tight let me put oxygen in an airtight container or airtight room oxygen in air tight room or maybe a room that is running out of oxygen well then every time I take a breath is 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 going to 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 because there's 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 3:00 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 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
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