Scarcity

Scarcity in economics is the lack of various forms of capital. Scarcity can be used to describe an economic situation in economics, or it can be used to describe more general situations.

In economics, scarcity is the result of people having "Unlimited Wants and Needs," or always wanting something new, and having "Limited Resources." Limited Resources means that there are never enough resources, or materials, to satisfy, or fulfill, the wants and needs that every person have. Scarcity is called the "basic economic problem," meaning that it always exists.

Scarcity exists due to the effects of nature such as drought, floods, storms, pest infestation, fire and other things. Real scarcity can also exist by over use of non-renewable resources. Goods (things) and services are also scarce because there are only a limited number of things in the world and due to the limits of technology and our own priorities.

More scarce goods and services have higher prices, because of supply and demand. Gold is used less than iron, but the price of gold is much higher, because gold is more scarce. Lawyers are paid more than janitors, because there is scarcity of qualified lawyers.

Scarcity of capital is the main constraint in economic development of developing countries. Economic growth is an increase in the production and consumption of goods and services. It entails increasing population or per capita consumption. It is represented by increasing Gross Domestic Product (GDP). Scarcity refers to limited resources. These resources are the inputs of production i.e., land, labor and capital.