Rationing

What is 'Rationing'

Rationing is the artificial restriction of raw materials, goods or services. Rationing commonly occurs when governments fear a shortage and want to make sure people have access to necessities, such as after a natural disaster or during a war. Governments can also impose rationing in the face of failed policies such as central planning, or may be forced to use rationing as a result of shortages.

BREAKING DOWN 'Rationing'

For example, during World War II, the U.S. government imposed rationing on the country so that sufficient materials and production capabilities would be available to the military. It did not matter how much of an item an individual or family wanted or could afford to purchase; people were only allowed to purchase a limited amount specified by the government and controlled by ration coupons. Items including tires, gasoline, sugar, meat, butter and many others were subject to rationing.


Rationing can lead to the creation of black markets for the rationed goods. Black markets allow individuals to use their allotment of a rationed good that they don't need to obtain more of a rationed good that they do need.



RELATED TERMS
  1. Rational Expectations Theory

    An economic idea that the people in the economy make choices ...
  2. Asset Rationalization

    Reorganizing a firm's assets in order to improve operating efficiencies ...
  3. Rational Behavior

    A decision-making process that is based on making choices that ...
  4. Paradox of Rationality

    The irony that rational decision-making in game theory situations ...
  5. Rational Choice Theory

    An economic principle that assumes that individuals always make ...
  6. Rationalization

    A reorganization of a company in order to increase its efficiency. ...
Related Articles
  1. Investing Basics

    Explaining Rational Behavior

    Rational behavior guides the decision-making process toward choices that maximize an individual’s benefit.
  2. Term

    Understanding Rational Choice Theory

    Rational choice theory assumes an individual will always make prudent and logical decisions that yield the most benefits.
  3. Retirement

    This Is Your Brain On Stocks

    Find out how the human mind can hurt investors' portfolios.
  4. Products and Investments

    The One Thing Your Portfolio Must Always Have

    Portfolio diversification is essential in any situation, but especially so as the market finally returns to fundamentals.
  5. Products and Investments

    The One Thing Your Portfolio Must Always Have

    Portfolio diversification is essential in any situation, but especially so as the market finally returns to fundamentals.
  6. Active Trading Fundamentals

    Understanding Investor Behavior

    Discover how some strange human tendencies can play out in the market, posing the question: are we really rational?
  7. Investing Basics

    5 Reasons To Avoid Index Funds

    Stock values don't always behave in rational ways, so blindly counting on index funds can be a mistake. Here are five reasons why.
  8. Investing News

    The Financial Singularity Will Destroy Your Return

    Given the current and future growth of financial technology, many believe algorithms will soon define what drives market outcomes. With a wealth of big data, algorithms would be able to create ...
  9. Economics

    Austerity: When The Government Tightens Its Belt

    When a government tightens its belt in tough economic times the entire nation feels the squeeze.
  10. Economics

    Macroeconomics: Schools Of Thought

    By Stephen Simpson The field of macroeconomics is organized into many different schools of thought, with differing views on how the markets and their participants operate. ClassicalClassical ...
RELATED FAQS
  1. What does the Efficient Market Hypothesis have to say about fundamental analysis?

    Find out what the efficient markets hypothesis has to say about fundamental analysis and how recent finance research has ... Read Answer >>
  2. What is the homo economicus?

    Homo economicus or "economic man" is the characterization of man in some economic theories as a rational person who pursues ... Read Answer >>
  3. On which financial statement does a company list its raw material costs?

    Discover what items are raw materials, how raw material costs affect businesses, and where these costs are recorded on a ... Read Answer >>
  4. How can minimum wages contribute to a market failure?

    See why minimum wage laws create a market failure among low-productivity workers by making it illegal for companies to hire ... Read Answer >>
  5. How does government policy impact microeconomics?

    Read about how any type of government policy necessarily impacts the microeconomic decisions that are made by individuals ... Read Answer >>
  6. How do command economies control surplus production and unemployment rates?

    Find out how and why command economies fail, why full employment is possible under state compulsion and why overproduction ... Read Answer >>
Hot Definitions
  1. Physical Capital

    Physical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist ...
  2. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  3. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  4. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  5. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  6. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
Trading Center