What is Scarcity



Scarcity refers to a basic economic problem: the gap between limited resources and theoretically unlimited desires. This situation requires people to make decisions about how to allocate resources efficiently, in order to satisfy basic needs and as many additional wants as possible. Any resource that has a non-zero cost to consume is scarce to some extent, but what matters in practice is relative scarcity.

What is Scarcity


Scarcity meaning

In his 1932 Essay on the Nature and Significance of Economic Science, British economist Lionel Robbins defined the discipline in terms of scarcity:

Economics is the science that studies human behavior as a relationship between scarce ends and means that have alternative uses. 1

In a hypothetical world where every resource - water, hand soap, expert translations of Hittite inscriptions, enriched uranium, organic bok choy, bourbon - is abundant, economists would have nothing to study.

There would be no need to make decisions about how to allocate resources, and there would be no trade-offs to explore and evaluate. On the other hand, in the real world everything is worth something; in other words, every resource is scarce to some extent.

Money and time are extremely scarce resources. Most people have too little of one, the other, or both. An unemployed person may have a lot of time, but it is difficult for him to pay the rent - lack of money. On the other hand, an energetic leader may be financially able to retire on a whim, but still be forced to eat ten-minute meals and sleep four hours a night: they have a lot of money, but not enough time.

What is Scarcity

Natural Resource Scarcity

Natural resources can go beyond scarcity for two reasons. Anything that is available in near-infinite supply and can be consumed at zero cost or in exchange for other goods is not a scarcity. Alternatively, if consumers are indifferent to a resource and have no desire to consume it, or are unaware of it or its potential use at all, then it is not scarce, even if the total amount in existence is clearly limited. However, even resources are taken for granted as infinite abundance, and because they are free in dollar terms, they can become scarce in a sense.

Causes of economic scarcity

The main causes of economic scarcity are demand-induced, supply-induced and structural. Demand induced refers to supply stagnating and demand increasing. Supply-induced is when the supply of a resource is less than demand, and structural is when part of the population does not have the same access to resources as another part of the population.

Relative Scarcity vs Absolute Scarcity

Relative scarcity is, of course, when a resource is in limited supply. This has nothing to do with a company not creating enough supplies, but with only a certain amount of a resource being available on the planet. However, relative scarcity also refers to the ratio of supply to demand. For example oil. Although oil is currently plentiful, there is a finite amount available that will eventually fail to meet demand. It's a relative scarcity. Absolute scarcity also refers to a resource being inherently finite, but not in terms of demand. The best example of this would be time. 24 hours a day, 7 days a week and 52 weeks a year. Time is an absolute scarcity

What is Scarcity


What is scarcity in marketing?

Scarcity is also a marketing technique that refers to a psychological technique that encourages a visitor to purchase. So, the developed advertising plays on the feeling of fear, supposedly a person will not get this or that product. Scarcity offers are phrases like “Quantity is limited!”, “Price is only valid until the end of the month”, etc.