scarcity

Scarcity is the condition in which unlimited human wants exceed the finite resources available to satisfy them. It is a fundamental and persistent economic problem, distinguishing it from a shortage, which is temporary and resolvable by adjusting prices or production. Scarcity arises because resources such as land, labor, capital, and time are limited, while desires can be virtually limitless.

Because resources are scarce, choices must be made. Individuals, firms, and governments face opportunity costs—the value of the next best use forgone when a resource is allocated to one purpose rather than another. Markets, prices, and institutions help allocate scarce resources by signaling relative value and coordinating supply and demand. When prices rise, resources tend to be saved or redirected to higher-valued uses; when prices fall, they may be overused or wasted.

Scarcity has many forms. Physical or natural scarcity refers to limits on quantities of land, water, minerals, or energy. Economic scarcity includes capital and knowledge that are insufficient to meet all wants at current technologies and wealth levels. In environmental and resource economics, scarcity also refers to long-run frictions that constrain sustainable consumption.

Responses to scarcity include increasing efficiency, technological innovation, resource substitution, and investments that expand productive capacity. Policy tools such as price signals, property rights, taxes or subsidies, and rationing can improve allocation but may also create distortions. Societal choices about distribution, equity, and sustainability shape how scarcity is managed.

Historically, discussions of scarcity have shaped economic theory, from Malthus's population concerns to modern growth models that emphasize productivity gains. While some regions have achieved relative abundance in certain goods, scarcity remains a defining constraint in resource planning and development.