Question

What is scarcity? Can you think of two causes of scarcity?

Short answer

When human demands for products, services, and resources overwhelm available resources, scarcity occurs. The two causes are a rapid increase in demand and a rapid decrease in supply.

Step-by-step solution

Concept

The concept of scarcity is fundamental to the definition of economics because it encourages people to choose how they will spend their resources in order to satisfy their unending wants and desires. Making decisions is an important aspect of economics. If there was no scarcity, there would be no economic difficulties.

Explanation

When human demands for products, services, and resources overwhelm available resources, scarcity occurs. Resources are needed to produce the goods and services we want, yet they are scarce. Of fact, time is the ultimate limited resource; everyone, rich or poor, has just 24 hours in a day to obtain the things they seek. At any given time, there is a limited quantity of resources available.

A sudden spike in demand or a decrease in supply can cause scarcity.