Economists study resource scarcity to better understand the
cost and distribution of raw materials. Learn about the causes and effects of
resource scarcity.
What Is Resource Scarcity?
The term "resource scarcity" refers to a limited
resource that has a low supply and a high demand. Human desires can be infinite
in theory, but there are finite amounts of material resources, so there will
always be some degree of scarcity.
Economists use scarcity of resources to determine the value
of various goods. Because an economic good, such as natural gas, is limited in
supply, its price fluctuates with the market. A free good, such as air, on the
other hand, is not scarce and thus not commodifiable.
3 Causes of Resource Scarcity
Various factors influence the supply and demand for
available resources. The following are the three main causes of scarcity:
1. Demand-induced: As supply remains constant, increasing
demand causes resource scarcity, resulting in shortages. For example, rising
global population growth raises demand for basic necessities such as food,
clothing, and shelter. Demand-induced shortages occur when production of these
goods fails to meet rising demand.
2. Supply-induced: When the supply chain for new
technologies abruptly decreases while demand remains stable, the good becomes
scarce. Supply-induced shortages are resource scarcity caused by a decrease in
supply.
3. Structural: Scarcity is also caused by human factors
such as the design of supply chains and manufacturing practices. Structural
scarcity occurs when one segment of society has access to resources that
another segment of society does not. Some communities, for example, face water
scarcity due to restrictions on freshwater access.
Impact of Resource Scarcity
Scarcity of resources has an economic and environmental
impact. When a good becomes scarce, its price rises, causing economic issues
such as inflation and market decline. As a result, supply and demand imbalances
can stifle economic growth and cause widespread shortages.
Scarcity of resources encourages sustainable development
from an environmental standpoint. The depletion of non-renewable resources, such
as fossil fuels, spurs technological innovation that promotes sustainability
and alternative uses for renewable energy sources. Policymakers and business
leaders can incorporate sustainable practices into their business models to
combat the impact of greenhouse gas emissions and climate change by researching
megatrends and optimizing resource use.
2 Types of Resource Scarcity
There are two types of scarcity: relative and absolute
scarcity.
1. Absolute scarcity: Absolute scarcity refers to a
commodity that has physical constraints on its availability. Absolute scarcity,
unlike relative scarcity, is unrelated to demand because it describes an
unchanging supply of a resource. For example, there are only so many hours in a
day”you can't add more time to a twenty-four-hour period.
2. Relative scarcity: This term refers to resources that are
in short supply due to limited natural availability. Because this type of
scarcity corresponds to demand, rising demand has an effect on supplies.
Nonrenewable resources, such as fossil fuels, are examples of relative scarcity
because the planet has a finite supply of these natural goods and demand is
high.
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