What is Scarcity? A key to understanding economics, scarcity is the difference between what people want and the ability of the available supply of those wants. For example, suppose there are two goods – a pair of jeans and a car – in abundant supply; one of extreme value and the other of negligible value. If demand for the jeans rises above the amount of available cars, the one with the scarce value will be bought up at a discount, while the other will continue to be produced at full price because of the high demand.
Let’s now study economics in the same way. We begin by assuming that what is scarce, that is, items of value – the cars – are inherently less valuable than items that are not scarce, such as the jeans. Next we must decide how to allocate the scarce items. We could allocate them by using technology to increase their production, and then we could allocate them by using technology to lower their consumption. The problem with this approach is that technology has the potential to create wealth in the form of technology itself, rather than just the goods we need.
In contrast, the goods of minimal use are not necessarily in abundance, and there may also be some natural resources in limited supply. Still, there are no goods that cannot be produced in significant quantities. Therefore, there are natural resources and a limited amount of natural resources. In our example, the one scarce resource is the car. However, there are a large number of cars, so it is not the car itself that are scarce, but rather, the process of manufacturing the car.
This same fundamental aspect can be applied to all areas of human action, including education, religion, science, medicine, technology, art, money, politics and markets. When people lack a basic understanding of economics, they will naturally tend to act in an inefficient way, because they simply do not know the outcome of their actions. Because all aspects of society depend on one another, an understanding of how the economy works is essential. A basic understanding of scarcity and demand will help people understand what they need and how they are going to get it. It may also help them realize that there is a problem and that something needs to be done about it.
When an area suffers from scarcity, people tend to buy the goods that are in short supply. They think that if they have the extra money, they should buy the high-cost goods. This is a mistake, because the economy depends on us buying the goods that we need at the right time; otherwise, there will be a shortage and prices will rise, which will result in everyone buying at a premium and causing a crisis.
What is Scarcity when it comes to demand is that people buy the scarce goods but then become very rich by storing them away. In a competitive market, where everyone is trying to obtain the scarce good, prices are driven up. However, when the goods become scarce, people no longer want them and attempt to acquire them by force. The result is increased competition and the net effect is that the prices decrease.
What is Scarcity when it comes to specialization? Let’s say that I wanted to purchase a new camera. If there were no other cameras available to purchase along with my new camera, then I would go ahead and purchase it. But since other cameras are being purchased and the cost of those cameras is rising, I eventually end up with a camera that costs over three thousand dollars, while all other options are being utilized by other people at much lower prices.
What is Scarcity when it comes to time? In today’s world, most people want their products yesterday. Therefore, they try to acquire the product as soon as possible, or often times, order it the very next day delivery in order to have it before the competition can get to it and make purchases.