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Japanese Disaster Illustrates Key Economic Concepts
March 22, 2011

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The aftermath of the Japanese earthquake-tsunami-nuclear scare illustrates several key economic concepts:

Want vs. Need
When millions of people are homeless or living in homes that have no electricity and/or running water, they quickly work out the difference between a want and a need. Suddenly, things like cell phone chargers take on must-have status, especially in a technologically saturated country like Japan.
On an even more basic level, people are having to rely on buying their own bottled water or getting water from other people. One thing that many people take for granted — water running from the tap anytime the faucet is turned on — is in scarce supply for a massive amount of people.

In the same way, people might be really wanting fancy foods that they might be used to eating on a regular basis, but they need to eat, so they're eating basic rice or noodle dishes because that is what is available in the wake of the natural disaster that severed supply lines all across the country.

Supply and Demand
Speaking of supply, a natural disaster, even a small one, can illustrate the difference between what is wanted (Demand) and what is available (Supply). Under normal circumstances, the more people say they want something and are willing to pay for it, the more things tend to appear and keep appearing (supply following demand). However, in this case, it's basically a one-way street: what you see is what you can get. People might want to have their electricity turned back on 24 hours a day, but the damage to the power system right throughout the country is so severe that many power companies are instituting rolling blackouts for the foreseeable future, until the battered nuclear reactors are brought back on line or a satisfactory alternative energy source is found.

Scarcity and Choices
Many things in the northeastern part of Honshu (and indeed in other parts of the country, most notably) are scarce — food, water, electricity, gasoline. People are having to make choices based on limited resources, including money. When entire businesses have been wiped out, business owners and their employees are left with no regular income and must make do with what little money they have, forcing them to choose sometimes between filling up the car's gas tank and buying a week's worth of food. People might want "normal" foods like fresh fruits and vegetables but not be able to get them because those foods have become "luxuries" in their scarcity, forcing people to eat instant or processed meals.

On a more basic level, people respond to scarcity my making choices about what to prioritize. At gas stations across the country, people are waiting for hours to fill up their vehicles, choosing, because they are afraid that the supply will run out, to spend their time doing that rather than doing other things. More than person was reported to have waited so long in line at a gas station that the gas ran out and the car had to be pushed to the pump.

Japan is a net food importer, meaning that it imports more food than it exports. Some of the ports in the northeastern part of the country are ruined and, therefore, cannot receive shipments of food. Some food that is grown in Japan with the intention of shipping it overseas has been contaminated and cannot leave the country. In both cases, Japan would normally depend on interactions with other countries in order to get supplies, in the case of food shipments, or money, in the case of exports.



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