Chapter Notes: Competition and Discrimination

Hey everyone! Welcome to one of the most fundamental ideas in Economics. In this chapter, we're going to explore why we compete for things and how we decide who gets what. It might sound simple, but understanding this "unbreakable chain" of concepts is key to seeing the world like an economist!


Let's Start with the Basics: A Quick Recap of Scarcity

Remember the first thing you learned in Economics? Scarcity. It's the big problem that everything else stems from. Don't worry if you've forgotten, here's a quick refresher.

Scarcity is the condition where our wants are unlimited, but the resources available to satisfy them are limited.

Think about it:

• You only have 24 hours in a day (limited resource), but you want to study for the DSE, play video games, watch dramas, sleep for 8 hours, and hang out with friends (unlimited wants).

• Hong Kong has a fixed amount of land (limited resource), but everyone wants a bigger apartment (unlimited wants).

Because of scarcity, we are forced to make a choice. You have to choose how to spend your time, and society has to choose how to use its land. Scarcity is the starting point for everything!

Key Takeaway:

Scarcity (unlimited wants, limited resources) is the fundamental economic problem that forces us to make choices.


From Scarcity to Competition: Why We Can't All Win

So, what happens when two or more people want the same scarce thing? Imagine the last pair of limited-edition sneakers in a shop. If ten people want to buy it, what's going to happen?

That's right - Competition!

Competition is the process of striving against others to get something that is scarce. When resources are limited and more than one person wants them, competition is inevitable. It's a natural result of scarcity.

An Everyday Analogy: Musical Chairs

Think of the game "Musical Chairs".

• Scarcity: There are fewer chairs than people.

• Competition: Everyone has to compete to get a chair when the music stops.

This happens everywhere in life, not just in games or business:

• Students compete for limited places in top universities.

• Job applicants compete for a single job opening.

• People compete for seats on a crowded MTR train during rush hour.

Did you know?

Competition exists even in situations that don't involve money. Siblings might compete for their parents' attention, or for who gets to use the computer first. As long as there is scarcity, there will be competition!

Key Takeaway:

Whenever there is scarcity, and more than one person wants a good, competition will naturally occur.


How Do We Compete? The Role of Discrimination

Okay, so we know we have to compete. But how do we decide who wins? Every competition needs rules. In economics, we call these rules or criteria for winning "discrimination".

Now, hold on! This is a super important point. In everyday language, "discrimination" usually has a negative meaning, like treating someone unfairly based on their race or gender. In Economics, the word has a neutral meaning.

Discrimination simply means using a set of criteria to choose among competitors. It's the "rule of the game" that determines who gets the scarce goods.

Common Mistake Alert!

DO NOT assume "discrimination" in Economics is always bad or unfair. It is simply the *process of selection* based on a criterion. A university using DSE scores to select students is a form of discrimination (using academic merit as the criterion). It's not necessarily "bad", it's just the rule of that particular competition.

Let's look at different rules (criteria) for different competitions:

• Price Criterion: This is the most common one in a market economy. The rule is "whoever is willing and able to pay the highest price wins".
Example: Bidding for an apartment. The person who offers the most money gets it.

• First-come, first-served: The rule is "whoever gets in line first wins".
Example: Queuing up for the latest iPhone on its release day.

• Academic Merit: The rule is "whoever has the best grades and interview skills wins".
Example: Getting a place at the University of Hong Kong.

• Beauty or Talent: The rule is "whoever is judged to be the most beautiful or talented wins".
Example: A singing contest or a beauty pageant.

• Age: The rule is "you must be of a certain age".
Example: Senior citizens getting a discount on public transport, or needing to be 18 to enter a bar.

As you can see, different criteria are used in different situations. The choice of which criterion to use can have a big impact on who the "winners" and "losers" are.

Key Takeaway:

Competition requires rules to decide a winner. In economics, these rules are called criteria, and the process of applying them is called discrimination. This is a neutral term for selection.


The Unbreakable Chain: Scarcity → Competition → Discrimination

Now let's put it all together. These three concepts are linked in a logical chain that you can't break. It's the core of this topic!

Step 1: Scarcity Exists

We start with the basic fact that we can't have everything we want. There are not enough resources to go around.

(e.g., There is only ONE championship trophy.)

Step 2: Competition is Inevitable

Because the resource is scarce and multiple people want it, they must compete for it.

(e.g., Many teams play against each other to win the trophy.)

Step 3: Discrimination is Necessary

To resolve the competition and decide on a winner, some rules or criteria must be used. This is discrimination.

(e.g., The team that scores the most points in the final match wins. The criterion is "most points scored".)

Scarcity → Competition → Discrimination

You can't get rid of competition or discrimination without getting rid of scarcity first – and that's impossible! What you *can* do is change the form of competition by changing the discriminatory criterion.

Let's see an example:

Situation: Distributing face masks during a pandemic when there aren't enough for everyone.

• Scarcity: Limited supply of masks, unlimited demand.

• Option 1: Discriminate by price.
Let pharmacies sell them. People will compete by paying a high price. The wealthiest might get the masks.

• Option 2: Discriminate by 'first-come, first-served'.
Give them away for free but people must queue. People will compete with their time. Those who can wait the longest get the masks.

• Option 3: Discriminate by need.
Let the government give them to the most vulnerable, like the elderly or sick. People will compete by trying to prove they fit the "vulnerable" criteria.

Notice that in every case, scarcity leads to competition. Making the masks "free" didn't stop the competition; it just changed the rule (criterion) from price to time.

Final Key Takeaway:

The relationship is a fundamental law in economics: Scarcity is the source of the problem, which inevitably leads to Competition. To solve the competition, some form of Discrimination (the use of criteria) is necessary.