hmhttp://www.examiner.com/x-14333-Green-Transportation-Examiner~y2009m9d4-Oil-scarcity-leads-us-to-electric-cars-which-leads-us-to-Neodymium-scarcity
This article talks about how the shortage of oil leads to the development of electric cars. When there is a low supply of a limited resource, it becomes harder to extract and production would fall. The low supply of oil causes a problem for gas fueled cars and electric powered cars would be a solution for this. Electric cars use rare earth metals to make the electric motor. Neodymium, terbium and dysprosium are key components of an alloy used to make the high-power, lightweight magnets for lightweight powerful electric motors. All non-renewable resources such as oil and even neodymium are limited in supply.
This article presents a perfect example of scarcity. Scarcity is the reason why there is value to goods because there is a limited supply. The shortage of oil, due to the fall of production, means it is increasing scarcity which leads to an increase in price. As a result, consumers will have to sacrifice more in order to purchase oil which means their opportunity cost would increase. In which case, consumers would look for a cheaper alternative such as electric powered cars. Since consumers are the major determinant of resource use and as long as the consumers are willing to pay for the electric cars, the suppliers would increase the production of electric cars to meet the demands of the consumers.
In my opinion, electric cars are only a solution if the prices of oil, which is determined by its scarcity, increase to a point where consumers are unwilling to pay. In other words, the success of electric cars is determined by the price of the oil. However, due to the fact that the resources used to produce the electric car are also scarce, this is only a temporary solution. Another solution is that technology may improve consumption efficiency of the scarce resources so that the supply will not be depleted as quickly.
