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Scarcity and Shortages

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Scarcity vs Shortages

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It is easy to use the terms “Scarcity” and “Shortage” interchangeably.

While both relate to limited availability, scarcity is a permanent condition arising from the imbalance between our limitless wants and finite resources. In contrast, a shortage is a temporary market situation where demand exceeds supply at a particular price.

What is a shortage?

A shortage happens when there is not enough of a particular good or service to meet the demand at a specific time. This can be due to things like production issues, sudden high demand, or supply chain problems. Unlike scarcity, which is permanent, a shortage is temporary and can be fixed over time as the market adjusts. Take the Covid-19 pandemic as an example:

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COVID-19 pandemic and shortages: Some people, driven by greed or a desire to be overly prepared, hoarded large quantities of toilet paper far beyond their needs. This created a temporary shortage, even though there wasn't a true lack of toilet paper production capacity!

Coronavirus panic: Why are people stockpiling toilet paper?

Loo roll has become the top "panic buy" item in several countries after coronavirus fears.

www.bbc.co.uk

Coronavirus panic: Why are people stockpiling toilet paper?

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NOTE: Scarcity refers to the naturally limited availability of something that can’t be immediately replaced when they are used up. Natural resources, for example, can’t be replaced on demand if we’ve used them all up.

A shortage is a market phenomenon. It happens when more people want to buy a product than there is available at the current price. This is a temporary situation that can be fixed by making more of the product or changing the price.

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You may be asked to compare scarcity and shortage in your Higher Economics exam. Here we will provide a summary table of these comparisons and explain them in more detail!

Summary Table of Scarcity vs Shortage

Scarcity	Shortage
Unlimited wants	Demand exceeds supply
Permanent- can never be resolved	Temporary
Wants never fully satisfied due to human nature	Solved by a rise in price/an increase in supply
Universal	Limited to a certain market

Unlimited wants vs. demand exceeds supply

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Scarcity means we have limited resources, like land, water, and labour, but people have unlimited wants. This natural limit creates a constant state of scarcity because there are always more things people want than what is available.

Shortages, on the other hand, happen in the market when demand for something exceeds the supply at the current price.

💃 For example, with Taylor Swift concert tickets, a shortage occurred as the number of fans wanting to buy tickets exceeded the number of tickets available. This is a temporary situation caused by the market, not by nature, and can be fixed by adjusting prices or increasing supply.

Why are Taylor Swift tickets so hard to get? The economics are complicated

The maths are simple. Most Taylor Swift fans wanting tickets to her Australian shows will miss out.

theconversation.com

Why are Taylor Swift tickets so hard to get? The economics are complicated

Permanent vs. temporary

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Scarcity is a permanent condition because resources are always limited compared to human wants. Shortages are temporary and can be resolved through changes in price or supply.

Wants never fully satisfied vs. can be solved

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Scarcity implies that human wants can never be fully satisfied because of limited resources. Shortages do not necessarily relate to the nature of human wants but to current market supply-demand imbalances.

For Taylor Swift’s concerts, ticket providers can:

1) increase supply of tickets or 2) increase the price.

Universal whereas Limited to a certain market

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Scarcity is universal. It affects all countries, all markets, and all people—no economy can produce enough to meet *every* possible want.

In contrast, shortages only affect specific markets at certain times. They can come and go depending on how quickly supply can adjust to demand.