So what is scarcity?
There are many ways we can define scarcity:
Human wants are unlimited, but resources are limited. Scarcity is one of the key concepts of economics. The demand for a good or service often exceeds its availability because society's resources are finite.
The problem of scarcity arises because there are never enough resources to satisfy all our needs and wants.
Regardless of a country’s wealth or stage of development, scarcity is a constant reality because human desires always exceed the resources available. Different economies try to tackle scarcity through various methods, but the fundamental issue remains everywhere.
Scarcity isn't just about the physical quantity of resources but also about how much people want them compared to what is available.
Relative scarcity describes a situation where a resource is limited in relation to demand.
🍕Pizza example: If you and three friends all want the last pizza in the shop, that pizza is scarce because demand (four people) outstrips supply (one pizza). If only one person wants it, then it wouldn’t be considered scarce.
Scarcity is therefore a relative concept, depending on the balance between how much is available and how much people want it.
Competing wants: People have a wide range of desires, and these desires can conflict. For example, two people might want both:
📱 a new phone
🌞 a vacation
However, you might not have enough money for both. This competition for resources creates scarcity.
- Greed: If everyone hoards resources or wants more than they need, it can make them seem scarcer than they truly are.
No matter how much we produce, people will almost always want more. Our wants and needs grow faster than our ability to supply them. This means we constantly have to make choices about how best to use and distribute scarce resources.
Can you think of other real-world examples of scarcity?
“Unless we take steps to adapt, more than half of Scotland’s population will be at risk of water scarcity by 2050 during very dry periods”
What methods can we use to reduce the impact of Scarcity?
10 examples of how we can reduce the impact of scarcity:
Think of it like finding extra pockets of a valuable good—when you discover new sources of a resource, you temporarily alleviate scarcity by increasing its availability.
Specialisation involves focusing on a specific task or product. Just as an athlete perfects one sport, producers concentrate on a narrower range of goods or services to become more efficient, reducing the impact of scarce resources.
Replacing fossil-fuel cars with electric vehicles is a good example. By switching to alternatives, such as renewables or newer technologies, we alleviate dependence on scarce resources like oil.
Using solar and wind energy instead of coal and oil is another way to reduce our reliance on resources that may run out, making it easier to cope with scarcity in the long run.
Encouraging people to move from areas of high unemployment to places with more job opportunities can address labour shortages and reduce scarcity in certain regions.
Training programs that give people flexible skills make them more adaptable and reduce scarcity of skilled workers in specific fields.
From robotics on the assembly line to new management styles, finding ways to produce more output with the same inputs helps us stretch limited resources further.
Immigration increases the supply of labour, which can be a valuable resource for a growing economy. This can help reduce the scarcity of workers in certain industries.
For example:
- Sustainability Education: Knowing how our choices impact the environment is crucial. By learning about sustainability, we might choose to buy less stuff, reducing the pressure on scarce resources.
- Price mechanism: Imagine a limited number of concert tickets being sold for a super high price! The price mechanism can act as a "rationing" system. When something is expensive, fewer people might buy it, reducing scarcity for those who really want it (but are willing to pay the price).
An efficient economy uses resources wisely (productive efficiency), allocates resources to the right places (allocative efficiency), and keeps everyone working (full employment). This helps us get the most out of what we have and deal with scarcity effectively.