Rationing

In economics, it is often common to use the word "rationing" to refer to one of the roles that prices play in markets, while rationing (as the word is usually used) is called "non-price rationing." Using prices to ration means that those with the most money (or other assets) and who want a product the most are first to receive it. Such rationing happens daily in a market economy.

Non-price rationing follows other principles of distribution. Below, we discuss only the latter, dropping the "non-price" qualifier, to refer only to marketing done by an authority of some sort (often the government).

In market economics, rationing artificially restricts demand. It is done to keep price below the equilibrium (market-clearing) price determined by the process of supply and demand in an unfettered market. Thus, rationing can be complementary to price controls.

An example of rationing in the face of rising prices took place in the Netherlands, where there was rationing of gasoline in the 1973 energy crisis.

A reason for setting the price lower than would clear the market may be that there is a shortage, which would drive the market price very high. High prices, especially in the case of necessities, are unacceptable with regard to those who cannot afford them. Economists argue, however, that high prices act to reduce waste of the scarce resource while also providing incentive to produce more.

In wartime, it is usually imperative for a government to maintain the support of this part of the population, to maintain "equality of sacrifice," especially since in most countries, the working-class and poor families contribute most of the soldiers.

Rationing using coupons is only one kind of non-price rationing. For example, scarce products can be rationed using queues. This is seen, for example, at amusement parks,

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