Question

There is only one cookies left in the package. No one wants to split the cookie, so Uday proposes the following solution to who gets to eat it. On the count of 3 each one will show either one or two fingers, they will add up all the fingers shown and divide by 3. If the remainder is 0, Joseph gets the cookie, if the remainder is 1, Uday gets it, and if the remainder is 2, Vanya gets the cookie. Whoever gets the cookie gets a payoff of 1, while the others get payoffs of 0.

Is this game a fair mechanism for allocating the cookie? Explain.

Answer 1

One of the central problems of economics is scarcity. Scarcity arises because we live in a world where there are limited amounts of almost everything, while our wants are limitless.

Think about a music performer you really love. Let's assume that performer has thousands or even millions of other fans worldwide. When that performer comes to a nearby city, there may be only 15,000-20,000 seats in the arena where they will perform. That creates a scarcity problem; there aren't enough seats in the building for all of the people who want to go to the concert. Now you might wonder what determines who will get a seat. Anytime there is scarcity, and that's all of the time, society has to come up with an allocation strategy to decide who gets the scarce resources like those concert tickets.

Like above example Uday has one cockies packet left and it wanted by three person.so here a scarcity problem arises for solving it Uday use allocating stratergy.

Allocation strategies are necessary because resources, such as goods and services, are only available in limited quantities while wants are unlimited.