By Arjun Chandrasekar.
Scarcity, one of the most common terms in economics, is basically when a certain product or service is limited in quantity, so it’s very scarce in the market. With the limited amount of supply, because the demand still stays the same, allocating resources in a proper distributive manner is extremely important. Companies always put their customers’ wants and needs first, so creating an efficient plan to tackle scarcity is crucial.
All resources are scarce to some extent, and if they weren’t, allocation wouldn’t even be an issue. But this doesn’t include obviously abundant resources such as water or air because they have infinite supply. However, when studying scarcity, economists consider everyday products, for example, food, cars, oil, etc.
Scarcity in Different Scenarios
For many products(goods or services), consumer demand is high. And although companies repetitively output more and more of their products, consumers will always win this “race”.
This can also be related to personal finance; people make a certain amount of money, and most struggle with how to best allocate or split up their money for expenditures such as rent, mortgage, groceries, debt, etc. People with relatively lower incomes will find it harder to maintain a stable financial balance between saving and spending, while people with higher incomes will find it easier. But don’t take this for granted, because even if you’re making $200,000 a year, this can all disappear from bad spending habits. In fact, the more you make, the more you should save, so you can build up on your wealth.
Scarcity can also be applied to time. Productivity and hustle-culture is such a huge thing nowadays, and many people find it hard to allocate their time suitably to do everything they desire such as working, dining, exercising, and relaxing. Everyone technically has enough time to do anything they want, but it’s important to split up your time to live a healthier and happier life. Here’s an example: let’s say the average person sleeps for 8 hours a day, works for 7-8 hours a day. There’s still about 8 more hours left in the day for this person to do practically anything. But some days, time is scarce, for example, if there’s a longer work day for 12 hours and you still want to sleep 8 hours, meaning you only get 4 hours left. Time is scarce, so it’s important for everyone to allocate their time wisely.
Overall, scarcity exists in all areas and industries, so it’s important to understand what exactly scarcity means, where scarcity applies, and how to best allocate resources. This article covers a brief overview of the definition of scarcity as well as some real world examples of scarcity in different scenarios. We hope this article helped in some way and if you’d like to learn more about stocks and personal finance, be sure to check out our other articles!