Question

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

Short answer

Scarcity refers to the fundamental economic problem of having limited resources to fulfill the unlimited wants and needs of individuals, households, and societies. One cause of scarcity is the limited availability of natural resources, such as land, water, and minerals, for example, the finite supply of oil. Another cause is population growth, where an increasing population places more demand for resources like food, water, and housing, potentially leading to shortages and higher prices.

Step-by-step solution

Definition of Scarcity

Scarcity refers to the fundamental economic problem of having limited resources to fulfill the unlimited wants and needs of individuals, households, and societies. Essentially, scarcity arises because there will always be a gap between the demand for something and the resources available to meet that demand.

Cause 1: Limited Natural Resources

One cause of scarcity is the limited availability of natural resources, such as land, water, and minerals. These resources are essential for producing goods and services, and their quantities are finite. For example, oil, which is a crucial resource for energy production and transportation, has a limited supply. As the global demand for oil increases, the supply becomes more scarce, which can lead to higher prices and potential shortages.

Cause 2: Population Growth

Another cause of scarcity is population growth. As the world's population continues to increase, the demand for resources like food, water, and housing will also increase, putting more pressure on the limited amount of resources available. For instance, in areas with rapid population growth, there might not be enough food or clean water to meet the needs of all the residents, leading to a scarcity of these essential resources.