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Types of scarcity in the economy

Edukasistan.com - Hello everyone! In the discipline of economics, an understanding of the concept of scarcity is a fundamental element. Scarcity refers to a condition where resources are limited while human needs and desires are unlimited.

This implies that there are more human needs or desires than the amount of resources that can satisfy them. Consequently, humans must choose and allocate resources wisely to meet those needs and desires.

Table Of Contents

    In economics, lack can be categorized into three types: absolute, relative, and lack of choice. Absolute scarcity occurs when the amount of available resources is so limited that it cannot meet basic human needs.

    A clear example of absolute shortages is the lack of water in dry areas or the limitation of agricultural land in areas with a high population density. Meanwhile, relative scarcities occur when available resources are sufficient to meet basic needs but not enough to meet all human desires and needs.

    Understanding these different types of shortcomings plays an essential role in the economic decision-making process. By identifying the types of shortages encountered, individuals and communities can make more informed decisions in allocating limited resources to meet their needs and desires.

    • In economics, scarcity refers to a situation in which the available resources cannot satisfy all human desires and needs.
    • There are three main categories of economic scarcity, i.e., the scarcity triggered by demand, the insufficiency driven by supply, and the structural scarcity.
    • The scarcity caused by demand arises when the quantity of demand for a commodity or service exceeds the quantity of supply available.
    • The scarcity triggered by supply occurs when the supply of a good or service is insufficient to satisfy the demand.
    • Structural scarcity arises when the resources needed are unavailable or difficult to access.

    What is Economic Scarcity?

    Types of scarcity
    Types of scarcity in the economy

    Economic scarcity needs more resources to meet all human needs and desires. The constraints of natural resources, labor, capital, and technology cause this condition. In the context of economic scarcity, there is a need to make choices about using such limited resources efficiently.

    Scarcity significantly impacts economic decision-making as it forces individuals and communities to choose between a variety of alternatives to the use of limited resources. For example, if a person has a limited fund of $10,000 and wants to buy two items worth $5000 each, the individual has to choose to buy one of the two items because of the limited funds he holds.

    Types of Economic Scarcity

    In economics, scarcity can be classified into three main types: demand-driven, supply-driven, and structural. Demand-driven scarcity occurs when the demand for a product or service exceeds the available supply.

    Meanwhile, scarcity driven by supply happens when a product or service supply is insufficient to meet existing demand.

    Structural scarcity, on the other hand, occurs when the necessary resources are not available or inaccessible due to factors such as economic inequality, government policies, or institutional barriers.

    In economics, the concept of scarcity plays a vital role in understanding how limited resources are allocated to meet unlimited needs and desires. This scarcity can be categorized into three main types: demand-driven, supply-driven, and structural.

    1. Demand-driven scarcity

    Demand-driven scarcity occurs when a high demand for a product or service exceeds the available supply capacity. This phenomenon is often seen in the launch of new products highly anticipated by the market.

    In this situation, high demand for limited supply causes product prices to rise, and production cannot fully meet market needs.

    Manufacturers are faced with raising prices to maximize profits or increasing production capacity to meet demand. However, rising prices can reduce consumer purchasing power and have negative implications for the economy as a whole.

    2. Supply-driven scarcity

    Supply-driven scarcity occurs when the availability of resources or goods is minimal, not enough to meet the market's needs.

    A clear example of this shortage is rare raw materials such as petroleum or precious metals such as gold. This situation also affects other industries that rely on such resources as input in their production processes.

    3. Structural scarcity

    Structural scarcity in the economic context refers to situations in which a shortage of resources or goods occurs due to the existing economic and social structures, not merely because of the physical constraints of resources.

    Structural scarcity occurs when economic inequality, government policies, or institutional barriers cause the unequal distribution of resources among populations. This results in some people being unableneeding help to access resources even though they are physically available.

    Economic and social experts acknowledge that structural gaps are often more related to distribution and access issues than actual availability. For example, enough food is produced globally to meet everyone's needs. However, there is still hunger and malnutrition in various places because of distribution problems, poverty, conflict, and political barriers that prevent food from reaching everyone who needs it.


    In economics, scarcity is one of the basic principles that describes conditions in which available resources are insufficient to meet all human needs and desires. A deep understanding of shortages is crucial because it affects how individuals and societies make economic decisions.

    In economic discourse, scarcity is a fundamental pillar for understanding the allocation of limited resources in meeting unlimited human needs and desires. This scarcity drives individuals and communities to make wise economic decisions when allocating resources.

    These types of shortages, including demand-driven scarcity, supply-driven scarcity, and structural scarcities, reveal various dimensions in which resources are insufficient to meet all human needs.

    Understanding these various types of shortfalls is crucial in economic decision-making, enabling individuals and communities to identify the most effective solutions in addressing shortfalls and maximizing well-being.

    Therefore, shortcomings are not only a challenge in allocating limited resources but also require a deep understanding of the dynamics of demand and supply and the structural factors that affect the distribution of resources.

    In the face of shortages driven by demand, supply, and structures, innovative strategies and effective policies are needed to improve resource efficiency and ensure more equal access to resources. Thus, understanding economic shorters and their types is critical to designing sustainable solutions to address global economic challenges and promote inclusive and sustainable development.

    Frequently Asked Questions (FAQs)

    1. What is scarcity in the economy?

    Scarcity in the economy is a condition where insufficient resources are available to fulfill human needs or wants.

    2. What are the types of scarcity in the economy?

    There are three types of scarcity in the economy: scarcity of natural resources, scarcity of labor, and scarcity of capital.

    3. What is natural resource scarcity?

    Natural resource scarcity occurs when insufficient natural resources are available to meet human needs. Examples are clean water, agricultural land, and fossil fuel scarcity.

    4. What is labor scarcity?

    Labor scarcity occurs when insufficient labor is insufficient to meet market demand. This can occur due to demographic factors, such as rapid population growth or declining birth rates.

    5. What is capital scarcity?

    Capital scarcity occurs when insufficient capital is insufficient to meet investment needs. This can occur due to economic factors, such as inflation or a decline in foreign investment.

    6. How to overcome scarcity in the economy?

    The way to overcome scarcity in the economy is by increasing the efficiency of using available resources, developing new technologies, and increasing investment in human resources. In addition, the government can also make policies to regulate the use of existing resources.

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