What is Scarcity?

Scarcity is one of the problems that economics wants to solve. This occurs whenever the demand for services and products is much greater than the supply of goods and services.

What is Scarcity?

Scarcity exists due to the limited resources and the endless needs and wants of the people. This scarcity affects how a society decides how to use these limited resources and fulfill their needs and wants.

Scarcity is important so that we understand how services and products are valued. Products and services that have less supply and are harder to get are often valued more than resources that are more abundant. Producers use this as a reason to charge a large amount if their goods or service has little supply.

What are the Causes of Scarcity?

There are three causes of scarcity, demand-induced scarcity, supply-induced scarcity, and structural scarcity.

• Demand-induced scarcity occurs when the number of supplies does not change but the number of demand increases.
• Supply-induced scarcity occurs when the number of supplies is much lower than the number of demand.
• Structural scarcity occurs when a large part of the population does not have access to products and services.

Two Types of Scarcity

Relative scarcity

It is a type of scarcity where supply is limited and relative to demand. This is often caused by not having an adequate supply of resources in the world. An example of this is crude oil and trees, it is a limited resource that has a high demand as these are needed for energy creation. 

There may be plenty of supply of crude oil at the present but our high demand for supply may cause shortages in the future. Oil is a natural resource that we cannot replace in a brief time.

Absolute Scarcity

This occurs if supply is only limited but it is not dependent on demand or relative to demand. An example of this is time, there are only 24 hours in a day even if we want more time, it will not change. The number of resources is absolute and there is no way to produce more.

References:

Scarcity, www.investopedia.com

Scarcity, nationalgeographic.org

Samuelson, P. Anthony., Samuelson, W. (1980). Economics. 11th ed. / New York: McGraw-Hill.