SCARCITY
 Even when the number of resources is very
 A resource is scarce when there is not enough
available to satisfy the various ways a society
wants to use it.
 Because wants are unlimited but resources are
finite, choice is an unavoidable issue in
economics.
 A situation that arises because people have
unlimited wants in the face of limited resources.
 Occurs when there are limited quantities of
resources to meet unlimited needs or desires
 Is the condition that results from society not
having enough resources to produce all the
things people would like to have.
 Refers to the basic economic problem, the gap
between limited that is, scarce resources and
theoretically limitless wants.
 Is the limited availability of a commodity, which
may be in demand in the market or by the
commons.
 Includes an individual's lack of resources to buy
commodities.
 Scarcity, also known as paucity, is an
economics term used to refer to a gap between
insufficient resources and the many theoretical
needs that people.
 Scarcity or paucity in economics refers to
limitation – limited supplies, components,
 raw materials, and goods-in an environment with
unlimited human wants. It is the fundamental
economic problem of having what appears to be
limitless human wants in a world with limited
resources.
 Is the result of people having "Unlimited Wants
and Needs," or always wanting something new,
and having "Limited Resources."
 Limited resources mean that there are never
enough resources, or materials, to satisfy, or
fulfill, the wants and needs that every person
have.
 The problem of scarcity is regarded as the
fundamental economic problem arising from the
fact that, while resources are finite, society's
demand for resources is infinite.
 Scarcity is a relative rather than an absolute
concept - water is scarcer in the desert and less
scarce in the rainforest.
 Scarcity implies the resources that we value;
time, money, labor, tools, land, and raw materials
that exist in limited supply.
 There are simply never enough resources to
meet all our needs and desires. This condition is
known as scarcity.
 Scarcity can involve non-renewable resources,
such as oil, precious metals and helium. It can
also involve potentially renewable resources,
which are being consumed faster than their
ability to replenish (e.g. over-fishing, excess use
of fresh water).
 At any moment in time, there is a finite amount
of resources available.
large, it is limited. Because these resources are
limited, so are the numbers of goods and
services we can produce with them.
 Combine this with the fact that human wants
seem to be virtually infinite, and you can see
why scarcity is a problem.
 Scarcity is a perpetual problem for economic
theory, which often assumes that humans have
unlimited wants but must find ways to fulfill these
wants using scarce resources.
RESOURCES SCARCITY
 Resource scarcity is the lack of availability of
supplies required to maintain life, or a certain
quality of life.
 An increase in natural resource scarcity is
defined as a reduction in economic well-being
due to a decline in the quality, availability, or
productivity of natural resources.
 In various ways, these models project increasing
scarcity of food in the future.
 Resource scarcity is defined as a situation
where demand for a natural resource is
exceeding the supply. leading to a decline in
available resources
 Natura resources for example: natural gas,
petrol, coal, gold
 and are scarce
 These are made by nature and since so many
centuries we are extracting and using mem.
Supply would not last forever but demand is
rising_
TYPES OF SCARCITY
1. Supply-Induced Scarcity
2. Demand- Induced Scarcity
3. Structural Scarcity
4. Material scarcity
5. Contrived scarcity
SUPPLY-INDUCED SCARCITY
 Environmental degradation decreases the
overall amount of a limited natural resource,
decreasing the amount available to each
individual.
 A human induced decline in the quantity or
quality of a renewable resource leads to
worsening supply induced scarcity.
DEMAND- INDUCED
 Population growth or increasing consumption
levels decrease the amount of limited natural
resources available to each individual.
 Demand-induced scarcities are caused by the
effects of population growth, which reduces a
resource's per capita availability by dividing it
among more and more people.
STRUCTURAL SCARCITY
  It is often caused by a severe imbalance in the
distribution of wealth and power that results in
some groups in a society getting
disproportionately large slices of the resource
pie, while others get slices that are too small to
sustain their livelihoods.
 Such unequal distribution or structural scarcity is
a key factor in virtually every case where
scarcity contributes to conflict.
 Often the imbalance is deeply rooted in
institutions and class and ethnic relations
inherited from the colonial period.
MATERIAL SCARCITY
 This reflects a physical rarity of a thing or
product.
CONTRIVED SCARCITY
 Is a reflection of a systemic effort to make a
thing scarcer in the mind of the buyer (eg.,
diamond industry, loans industry and
qualifications industries).
 On the surface, these are easily described by
any set of actions that place artificial barriers to
access for something that is desired.
CAUSES OF RESOURCE SCARCITY
 Environmental scarcity is caused by the
degradation and depletion of renewable
resources (e.g. a specific tract of cropland), the
increased demand for these resources, and/or
their unequal distribution.
 Population growth and increased per capita
resource consumption can cause depletion and
degradation, which can in turn produce a
decrease in total resource supply or, in other
words, a decrease in the size of the total
resource pie‟.
 A shortage occurs when more people want to
buy a good at the current market price than what
is available.
THERE ARE THREE MAIN REASONS WHY A
SHORTAGE CAN OCCUR:
1. Increase in demand (outward shift in demand
curve)
2. Decrease in supply (inward shift in supply
curve). Resource scarcity refers are also caused
by the declining availability of renewable natural
resources such as freshwater or soil; and
3. Demand-induced scarcity: Population growth or
increasing consumption levels, and the
decrease amount of limited natural resources
available to each individual.
OTHER CAUSES OF SCARCITY INCLUDES:
1. Demand-induced – High demand for resource;
2. Supply-induced – supply of resource running
out;
3. Structural scarcity – mismanagement and
inequality;
4. No effective substitutes
DEMAND-INDUCED SCARCITY
1. Demand induced scarcity could occur due to:
2. Growth in population;
3. Growth in real GDP and incomes enabling
people to consume more resources than before;
and
4. Changes in preference, e.g. growth in demand
for mobile phones, places greater demand on
certain metals, like cobalt and nickel used in the
production of lithium batteries.
SUPPLY-INDUCED SCARCITY
1. Supply induced scarcity can also be due to:
2. Bad weather/crop failure: A localized scarcity
can occur if there are particular problems.
3. For example, a fungal disease could decimate a
crop like olive trees, causing a shortage of
olives.
4. Degradation of supply. Another form of scarcity
is when the resource is polluted
5. making it unfit for consumption.
6. For example, a nuclear power disaster causes
radiation which makes drinking water and
farmland unusable in the surrounding area.
STRUCTURAL SCARCITY
1. This occurs when the problem is one of
distribution.
2. There is abundant water in the world, but in
certain areas, there may be a shortage of supply
due to lack of access. A country with great
inequality may cause scarcity for some.
3. For example, resources may be owned by a
small percentage of the population and the poor
may be unable to afford to buy the water supply.
4. Often scarcity is caused by a combination of
demand and supply induced effects. A rise in
demand, e.g. due to rising population causes
overcrowding and population migration to other
fragile ecological areas.
5. The increased farming and use of these fragile
areas can lead to resource degradation causing
a further fall in the supply of viable land.
6. This creates a negative feedback loop with
scarcity causing more strain on the limited
resources and therefore more pressure to cause
more scarcity.
Scarcity of FACTORS OF PRODUCTION:
1. Land
2. Labor
3. Capital
4. Entrepreneurship
Land
 All natural resources that are used to produce
goods and services.
 In economics, land refers to the “gifts of nature,”
or natural resources not created by humans.
 Economists tend to think of land as being fixed,
or in limited supply.
  Because the supply of a productive factor like
land is relatively fixed, the problem of scarcity is
likely to become worse as population grows in
the future.
Capital
 Any human-made resource that is used to
create other goods and services.
 Another factor of production is capital–the tools,
equipment, machinery, and factories used in the
production of goods and services.
 Such items also are called capital goods to
distinguish them from financial capital, the
money used to buy the tools and equipment
used in production.
Labor
 Any effort a person devotes to a task for which
that person is paid.
 Unskilled, Semi-skilled, Skilled, Professional.
 People with all their efforts, abilities, and skills.
Entrepreneurship
 A person who starts a business and takes the
risks by deciding how to utilize the other three
factors of production.
 Some people are special because they are the
innovators responsible for much of the change in
our economy.
 A risk-taker in search of profits who does
something new with existing resources.
 They provide the initiative that combines the
resources of land, labor, and capital into new
products.
The basic economic problem is how to allocate
scarce resources among alternate uses.
 Economies need to choose what we produce,
who we produce for (allocation), and how to
produce it (using the economic systems –
markets).
THE BASIC ECONOMIC PROBLEM
 Unlimited Needs and Wants
 Limited Supply
 Four Economics Questions:
1. What should an economy produce?
2. Who do we produce for?
3. How do we provide goods & services?
4. Who decides what we produce?
What should an economy produce?
 Do we produce necessities or luxury goods?
 Do we produce one type of car or many types of
car?
 Do we produce in the short run (consumer
goods) or the long run (capital goods)?
 Is there a point to some goods, like cigarettes or
PhDs?
 Is there a use for smaller niche goods and
unhealthy mass
Who do we produce for?
 Who gets the better cars and who gets the
cheap cars?
 Does anyone want an electric car?
 How do we allocate university places?
 What’s the point in new housing if few can buy
it?
How do we provide goods & services?
 What do we believe in – cheap goods or quality
goods?
 Do we use machines or people to make goods?
 Do we recycle?
 How much damage should we do to the
environment? (Yes, it’s not possible to keep the
environment damage free!)
Problems of scarcity/choice
 Scarcity forces people to make choices. To
make sure we get the best out of our
goods/services, we use rankings (priorities) to
give us the best happiness from the
goods/services.
 This not only works for people, but also
businesses and governments.
 We call these choices trade-offs (a balance
achieved between two desirable but
incompatible outcomes)
 Do we go and see a movie or go bowling?
SCARCITY = Wants > Availability of Resources
NEEDS
 Something that, if you do not have it for a long
period of time, you may die.
 This includes air, food, water, but also some
basic amenities like entertainment and love.
 Things that you must have in order to survive.
WANTS
 Something that is non- essential for life his
includes cinema tickets, speedboats, Television
and others.
 Wants are a step ahead of needs and are
largely dependent on the needs of humans
themselves.
 It is human nature to have many goods in life.
There would be an endless list of such wishes.
Let us call these wishes as ‘desires’.
 One may desire a good house, a car, a
computer, good food, decent clothes and so on.
How can one get all of these?
 One may have these things if he/she has
money. If one does not have enough money,
then only one or two of these or none of these
could be purchased.
 Which of our desires are to be fulfilled depends
upon our capacity to pay or purchasing power.
 That is why not all desires can be met as we
need money to satisfy them.
  The desires which are backed by money and
willingness to purchase may be called wants.
 A beggar may desire to have a car but this
desire can not be called a want as it is not
backed by adequate money.
 However, if a rich man desires to have a car and
is willing to purchase it, the desire can be turned
into a want.
HOW DO WANTS AND GROW
 Wants are a part of our living. They arise with
the birth of man. Man in ancient times was
satisfied while living in forests, drinking water
from the streams, plucking fruits from trees or
eating animal flesh to satisfy hunger.
 With the discovery of fire man started cooking
food. This led to the discovery of new food
items. Man’s taste grew and expanded. A large
variety of food stuffs came into existence. Today
you can find different varieties of tastes, colors
and shapes in food items.
 As regards clothing, man has moved from
unstitched animal skins and tree leaves to a
variety of clothes. In order to live better, man
discovered and invented new items of clothing.
As knowledge, taste and fashion are increasing,
new and better products in clothing are
emerging.
 In a similar fashion, need for housing has also
undergone a tremendous change. Man has
moved from caves to huts made of straw and
pucca houses made of bricks. Now a days,
houses made of wood, pucca houses,
bungalows and palaces with fancy doors,
windows and all sorts of decorative paints and
fixtures are in use.
 Over a period of time, these wants have grown.
How did it happen?
 There are some other wants which make our life
easy and comfortable. These are called
comforts.
 Examples of comforts may be coolers, scooter
etc. Some goods give us pleasure but they are
very costly.
 For example, luxurious cars, diamond jewelry
etc. such good are called luxuries.
SATISFACTION OF WANTS
 No, As soon as one want is satisfied another
takes its place; our wants increase because we
desire to live a better and comfortable life.
 As new goods and service are developed, we
want them. Wants can be satisfied by goods and
services.
 Goods and services can be produced with the
help of resources. Land, labor, capital and
entrepreneurship are called resources which
help in the production of goods and services.
Wants are unlimited but the resources to satisfy
them are scarce. As soon as one want is
satisfied, another takes its place.
 Some of these wants can be satisfied by man
with his limited income while for others he may
not be able to do so. It is, therefore, not possible
to fulfill all our wants though a single want is
satiable.
WANTS AND NEEDS DRIVE THE ECONOMY
 Businesses make money by satisfying the wants
and needs of consumers and other businesses.
 In this way, wants and needs drive the economy.
An Abundance of Wants and Needs
 Wants and needs determine what products and
services businesses provide.
CHARACTERISTICS OF WANTS
1. Wants are unlimited
 Famous economist Marshall has rightly said
that human wants are countless in number
and are varied in kind As soon as one want
is satisfied another want takes its place.
 This endless circle of wants continues
through out life.
 For example, a person who has never used
a fan would wish to have a fan. When this
want is satisfied, he would wish to get an air
cooler and a scooter.
 Once these wants are satisfied, then he
would wish to have an air conditioner, a car
and so on. Thus, we see wants never come
to an end.
 When this want is satisfied, he would wish to
get an air cooler and a scooter.
 Once these wants are satisfied, then he
would wish to have an air conditioner, a car
and so on. Thus, we see wants never come
to an end.
2. A single want is satiable
 Each want taken separately can be satisfied.
 It has rightly been said that there is a limit to
each particular want.
 For example, if a man is thirsty he can
satisfy his thirst by taking one, two or three
glasses of water and after that he does not
want water at that point of time.
3. Some Wants arise again and again
 Most wants recur. If they are satisfied once,
they arise again after a certain period.
 We eat food and hunger is satisfied but after
a few hours, we again feel hungry and we
have to satisfy our hunger again with food.
 Therefore, hunger, thirst etc. are such wants
which occur again and again.
4. Varying Nature of Wants
 Wants vary with time, place and person.
  They are also influenced by many factors
like income, customs, fashion,
advertisement etc.
 Thus, wants have been found to vary and to
multiply with the economic development of a
country

5. Presents wants are more important than

future wants
 Present wants are more important. A person
uses most of his limited resources for the
satisfaction of present wants. He does not
worry much about his future wants because
future is uncertain and less urgent.
 For example, providing for the education of
children in the present is more important
than providing for old age security in future.

6. Wants change and expand with development

 A simple example to show how wants are
changing is the telephone.
 Earlier, in the rural areas there were not
many telephones, but today telephone has
become a necessity for everybody for
keeping in touch with their near and dear
ones.
 People using telephone earlier, are now
using mobile phones.
 They want more and more facilities in their
mobile phones such as, Camera, Internet
and so on.

Satisfying Wants and Needs

 Businesses provide goods and services to
satisfy the wants and needs of businesses and
consumers.

How Resources Satisfy Wants

 As stated earlier wants are satisfied with the use
of goods and services.
 To produce these goods and services,
resources are used.
 With ever growing wants, we have been making
greater use of resources.
 Resource may be natural or man-made. All
resources can be classified into land, labor,
capital and entrepreneurship.
 For example, for the production of wheat, we
use land, labor, tractor pump set etc. (capital).
Farmer organizes all these factors to produce
wheat. He also uses seeds, manure and
fertilizers in this process.
 Thus, production of wheat involves the use of
resources. Similarly, production of all other
goods & services also involves the use of
resources.