The answer is no. It happens to anyone. The key is the insufficiency of resources to satisfy needs and wants. And scarcity occurs when we use the limited resources available to meet our unlimited wants and needs. So, naturally, the finite can’t suffice for the infinite. And this situation can happen to anyone, whether the poor or the rich.
Everyone wants more than they have. For example, on the one hand, the poor want various things they need and desire. On the other hand, however, they did not have enough money to buy these items. And their income is only sufficient for a few things essential to their life.
But, the poor may have more free time than wealthy people. They may not work, so they spend more time on personal matters, including family.
On the other hand, money may be fine for rich people. They can meet all their material needs easily. They can reach luxury goods easily. However, their desire continues. They are unsatisfied with what they have. For example, rich people may want to be more prosperous. Thus, they invest their money not for consumption now.
Even when money is not a problem for the rich, they still face scarcity. For example, they don’t have enough time to do everything they want. They may be too busy working. Thus, they do not have enough time for holidays or with their families. Say they have free time and a family, but 24 hours may not be enough to make all their business decisions.
What causes scarcity?
As I explained earlier, scarcity occurs when we fill the unlimited with the finite. Specifically, in economics, we meet demands on limited available resources to satisfy our unlimited needs and wants. Thus, because we use resources to satisfy our needs and wants, the demand for them exceeds the supply. As a result, some resources run out if we use them continuously, and they will become unsustainable in the long term.
Scarcity often occurs in non-renewable resources such as metallic minerals and petroleum. They are available in a certain quantity. They will run out if we use them from time to time, even if we use them carefully. For example, we might mine them bit by bit. But, since their supply can’t renew on its own – or at least takes millions of years – their availability starts to dwindle over time as they are mined.
Scarcity can also involve potentially renewable resources. It happens if their consumption is faster than their ability to replenish. For example, when we cut down trees, we can increase their number by replanting. But, to become ready to be cut, they need several years. And since we cut them down faster than we can grow and re-harvest them, they can become scarce too. Likewise, fish can run out if we consume more than they can reproduce.
In general, resources become scarce for several reasons:
- Problems in supply
- Problem in demand
- Structural problem
- Unavailability of effective substitutes
Problems in supply
Non-renewable resources are a good example. They are available in a certain quantity and will run out if we use them continuously. And they can’t renew by themselves. Or, at least, it would take them millions of years to do so – a time during which humans may have become extinct.
Aside from the natural nature of resources, scarcity also occurs due to bad weather. This problem often occurs for agricultural commodities. Bad weather causes supply in the market to decrease. As a result, their supply cannot meet all the demand in the market, leading to scarcity. Crop failure due to disease can also cause this condition.
Then, scarcity can also occur due to decreased quality. For example, existing resources have been polluted, rendering them unfit for consumption. Clean water and air may be in abundance. However, they become scarce if they are contaminated by pollution, resulting in us being unable to consume them.
Problem in demand
Resources are becoming increasingly scarce as the demand for them increases dramatically. Their scarcity accelerates if they are non-renewable. And if they are renewable, they become scarce as they are slower to renew than the increase in demand.
Farmland and population are good examples. The world population is estimated to increase by more than a third between 2009 and 2050 to 9.1 billion or 2.3 billion people. And to feed them, food production has to increase by about 70 percent.
As Robert Malthus put it, population growth grows exponentially while food or other resources grow linearly. As a result, scarcity occurs. But why didn’t that happen, at least until recently? The answer lies in innovation. We think about how with a few resources, we can maximize them. We then innovate from genetic engineering, agricultural mechanization, and the production of fertilizers and pesticides. Because of these innovations, we use limited agricultural land more productively. Thus, we produce more output on the same ground. Or, we turn barren land into arable land.
This scarcity could occur due to geographic problems. For example, some areas have a surplus of resources. However, other regions need more resources and cannot supply them sufficiently due to lack of access, causing scarcity.
The recent COVID-19 pandemic may also be a structural problem. Even though it is available and access is possible, some areas are deficient because goods and people are restricted in their mobility.
Another example of land is in urban areas. The land is getting more limited and only controlled by a few landlords. Thus, it becomes scarce for some people, forcing them to rent or pay exorbitant prices.
Substitutions are unavailable
For example, we reduce our carbon footprint with eco-friendly vehicles. We know oil is not renewable and has been dwindling. If we use them continuously, they will run out. We then think of ways to reduce their consumption. Then, we develop electric cars using solar power or wind power.
Particular resources may be limited. Therefore, we look for substitutes to satisfy the same needs and wants. However, scarcity can become a severe problem when insufficient substitutes exist. For example, clean water or air can become a fatal problem if they are polluted because we don’t have substitutes.
What to read next
- Economic Problem: Definition and 3 Basic Questions
- Scarcity in Economics: Meaning and Explanation
- Economic Resources: Definition, Types
- Needs: Definition, Example, Type
- Wants: Definition and Examples
- Choices in economic: Meaning, Importance, Reasons
- Opportunity Cost: Meaning, Importance, Examples
- Economic Efficiency: Meaning, Prerequisites, Why It Matters
- How are Economic Resources Allocated?
- Why Are Economic Resources Scarce?
- Why is Money Not an Economic Resource?
- Does Scarcity Only Work For The Poor? What Causes Scarcity?
- What Are the Consequences of Scarcity in Economics?