Scarcity Of Resources – Scarcity Of Resources in Economics, Causes And 6 Examples
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The scarcity of resources is a fundamental concept in economics that has a significant impact on decision-making and the allocation of resources. It creates a complex relationship between human desires and the limited resources available.
This necessitates individuals, businesses, and societies to prioritize and make choices about resource allocation to optimize their well-being and satisfy their urgent needs. By comprehending the concept of scarcity and its effects on business, you can enhance your professional skills and advance your career.
What Is Scarcity Of Resources?
In economics, scarcity refers to the limited availability of resources, which can result in an inadequate supply to satisfy human desires and needs. This can also affect how businesses make decisions about production and pricing based on the limited resources available.
Scarcity arises when the demand for a specific product, service, or natural resource surpasses supply. This can indicate that the current usage level of a natural resource is not sustainable, particularly with non-renewable and renewable resources.
Causes Of Scarcity
In the free market, scarcity is determined by the interaction between supply and demand. When there is a limited supply of a good or service, its price can fluctuate over time. For instance, oil is a finite resource that experiences frequent price changes. As oil reserves deplete, the supply decreases, leading to a price rise.
This high pricing can cause a demand reduction, forcing companies to seek alternative energy sources like solar panels, battery power, or electricity. In such circumstances, consumers may be forced to buy a higher-priced item, like gasoline, or they can choose a hybrid or electric car or bicycle.
The economy experiences scarcity due to three primary reasons.
When the number of people who want a particular resource or product increases or when their preferences change, the demand for that resource or product also increases.
If the amount of resources available is limited or exhausted due to natural disasters, weather conditions or depletion of resources, the supply will decrease.
When populations suffer from mismanagement or unequal access, which can be influenced by political factors or geographical location.
Examples Of Scarcity
Below are a few instances of limited availability of resources:
Water scarcity occurs when the amount of freshwater needed is greater than the amount currently available, resulting in a shortage of water resources to meet the demands of people, industries, and ecosystems. The main reasons for water scarcity include population growth, climate change, insufficient water infrastructure, overexploitation, and mismanagement of water resources.
Land scarcity is when there is a shortage of usable land compared to the demand or needs for various purposes, such as preserving the environment, developing infrastructure, and housing. This can result in a lack of land for populations to cultivate crops and rear animals.
Energy scarcity is when there are not enough energy resources to meet the energy demand in a specific location or worldwide. It happens when the supply of energy sources, such as fossil fuels or renewable energy, is not enough to satisfy the increasing energy needs of society.
The depletion of fossil fuels and the rise in energy demand are reasons for energy scarcity.
Commodity scarcity is when a shortage of certain goods or raw materials leads to limited availability and higher prices. This happens when the production or availability of a particular commodity is not enough to meet the demand from consumers and industries. There are various reasons for commodity scarcity, including constraints in supply, market speculation, and trade restrictions.
Healthcare scarcity occurs when the demand for healthcare services, resources, or facilities exceeds availability and accessibility. This can be caused by a lack of healthcare infrastructure, shortages of healthcare workers, or disparities between rural and urban areas.
Labour scarcity is a condition with a deficiency of available workers or a discrepancy between the demand for labour and the supply of workers with the necessary abilities and qualifications. It arises when there is an inadequate labour force to meet the requirements of industries and employers.
Some factors contributing to labour scarcity include a deficiency of skills, insufficient education, and inadequate training.