Scarcity
In economics, scarcity "refers to the basic fact of life that there exists only a finite amount of human and nonhuman resources which the best technical knowledge is capable of using to produce only limited maximum amounts of each economic good."[1] If the conditions of scarcity didn't exist and an "infinite amount of every good could be produced or human wants fully satisfied ... there would be no economic goods, i.e. goods that are relatively scarce..."[1] Scarcity is the limited availability of a commodity, which may be in demand in the market or by the commons. Scarcity also includes an individual's lack of resources to buy commodities.[2] The opposite of scarcity is abundance. Scarcity plays a key role in economic theory, and it is essential for a "proper definition of economics itself".[3]
This article is about the economic concept. For the social psychology concept, see Scarcity (social psychology). For the book by Sendhil Mullainathan and Eldar Shafir, see Scarcity: Why Having Too Little Means So Much.British economist Lionel Robbins is famous for his definition of economics which uses scarcity: "Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses."[5] Economic theory views absolute and relative scarcity as distinct concepts and is "quick in emphasizing that it is relative scarcity that defines economics."[6] Current economic theory is derived in large part from the concept of relative scarcity which "states that goods are scarce because there are not enough resources to produce all the goods that people want to consume".[6]
Scarce goods[edit]
A scarce good is a good that has more quantity demanded than quantity supplied at a price of $0. The term scarcity refers to the possible existence of conflict over the possession of a finite good. One can say that, for any scarce good, someones’ ownership and control excludes someone else's control.[20] Scarcity falls into three distinctive categories: demand-induced, supply-induced, and structural.[21] Demand-induced scarcity happens when the demand of the resource increases and the supply stays the same.[21] Supply-induced scarcity happens when a supply is very low in comparison to the demand.[21] This happens mostly due to environmental degradation like deforestation and drought. Lastly, structural scarcity occurs when part of a population doesn't have equal access to resources due to political conflicts or location.[21] This happens in Africa where desert countries don't have access to water. To get the water, they have to travel and make agreements with countries that have water resources. In some countries political groups hold necessary resources hostage for concessions or money.[21] Supply-induced and structural scarcity demands for resources cause the most conflict for a country.[21]
Nonscarce goods[edit]
On the opposite side of the coin, there are nonscarce goods. These goods don't need to be valueless, and some can even be indispensable for one's existence. As Frank Fetter explains in his Economic Principles: "Some things, even such as are indispensable to existence, may yet, because of their abundance, fail to be objects of desire and of choice. Such things are called free goods. They have no value in the sense in which the economist uses that term. Free goods are things which exist in superfluity; that is, in quantities sufficient not only to gratify but also to satisfy all the desires which may depend on them." As compared with the scarce goods, nonscarce goods are the ones where there can be no contest over its ownership. The fact that someone is using something doesn't prevent anyone else from using it. For a good to be considered nonscarce, it can either have an infinite existence, no sense of possession, or it can be infinitely replicated.[20]