Scarcity

Think of a thing that you like to have. What would your life be like if you suddenly couldn't get any more of it?
People deal with this kind of problem every day. It's called scarcity. It comes from the word scarce, which means there isn't a lot of it or it isn't always available.
Some fruits and vegetables are scarce in markets sometimes because those fruits or vegetables grow only at certain times of the year. Because the supply of fruits and vegetables is lower, there is a better chance that those fruits and vegetables will be scarce, or not always available. You may find that the market has no strawberries at all. Why? Either no shipments of strawberries came in, or so few strawberries came in that by the time you got there, they were all gone.
What does this mean for the demand of strawberries? If enough people want strawberries when none are available, then the demand is quite high. And the demand is high not because the price is low (as is usually the case) but because the supply is low.
An older person in your family can probably tell you about a time 30 years ago when there was a gasoline shortage. At that time, in the 1970s, gasoline was scarce. Many people wanted to buy it, but only a certain amount was available. This is a great example of scarcity: Wants are more than what is available. The supply was low. Because the demand was greater than the supply, the gasoline was scarce.
So how does scarcity relate to supply and demand? Scarcity is a measure of supply. If strawberries are scarce, then the supply of strawberries is low. And if many people want to buy strawberries when none are available, then demand is high because of a low supply caused by scarcity.
When things are scarce, we have to make choices. If the market doesn't have strawberries, you have to decide if you really want strawberries. If you do, then you will have to travel to different markets to try to find some strawberries. If you don't find any strawberries anywhere, then you will have to go without. Scarcity has forced you to go without strawberries.
Another choice you might have to make when something is scarce is how much you are willing to pay for it. If strawberries are normally a low price, then they might have a higher price when they are scarce. If that is the case, then you will have to decide whether you want to pay the higher price. You'll have to decide how badly you want those strawberries. If you have only a certain amount of money, then you'll have to buy the strawberries using some of the money you had planned to spend on other foods. Scarcity has forced you to make a choice between foods.
For many people, making difficult choices is a way of life. If you don't have enough money to buy all the foods you need (and many, many people don't), then you have to make choices. And the more scarcity you see on the shelves of the market, the more difficult choices you have to make.

Scarcity means that people want more than is available. Scarcity limits us both as individuals and as a society. As individuals, limited income (and time and ability) keep us from doing and having all that we might like. As a society, limited resources (such as manpower, machinery, and natural resources) fix a maximum on the amount of goods and services that can be produced.
Scarcity requires choice. People must choose which of their desires they will satisfy and which they will leave unsatisfied. When we, either as individuals or as a society, choose more of something, scarcity forces us to take less of something else. Economics is sometimes called the study of scarcity because economic activity would not exist if scarcity did not force people to make choices.
When there is scarcity and choice, there are costs. The cost of any choice is the option or options that a person gives up. For example, if you gave up the option of playing a computer game to read this text, the cost of reading this text is the enjoyment you would have received playing the game. Most of economics is based on the simple idea that people make choices by comparing the benefits of option A with the benefits of option B (and all other options that are available) and choosing the one with the highest benefit. Alternatively, one can view the cost of choosing option A as the sacrifice involved in rejecting option B, and then say that one chooses option A when the benefits of A outweigh the costs of choosing A (which are the benefits one loses when one rejects option B). 1. Identification * Scarcity is the concept of finite resources in a world of infinite needs and wants. Economics assumes people are greedy and always have needs and wants. However, there is only a certain amount of most goods. Therefore, people are forced to choose among their needs and wants, because Mother Nature does not satisfy our needs and wants infinitely. Scarcity encompasses these choices.
Significance
* Economics is the science of purposeful human action--that is, our choices. Without scarcity, economics is impossible. If things were not scarce and people did not have to make choices because everything was freely available, then people would not forced to make any trade-offs among their needs and wants--and thus, no economy.
Effects
* Any positive price is proof of scarcity. Prices are evidence that goods are scarce and that people makes choices about their needs and wants. Scarcity makes rationing a necessity. Scarcity also encourages competitive behavior. All people want to improve their condition, but everything has a finite quantity. People must compete for the scarce goods.
Warning
* Scarcity and shortage are not the same thing. A shortage is when the demand for a good exceeds the supply, usually meaning the price is too low and the market is not clearing. Scarcity always exists, but a shortage can be fixed.
Famous Ties * Adam Smith (1723-1790) is considered the father of economic science. Although some of his economic ideas were brilliant (such as laissez-faire, the invisible hand), Smith overlooked the concept of scarcity in his theory. When attempting to explain the concept of prices, he forgot that some things are higher priced because they are rare and not very abundant. He assumed that prices were just a reflection of the value of the good, when really values are subjective. Scarcity is objective.
The concept of scarcity is essential to the field of economics. A resource is considered scarce when its availability is not enough to meet its demand. Scarcity is based on the idea that oftentimes a limited supply of goods or services comes up against an ever increasing demand for it and that, as such, every effort must be made to ensure its proper utilization and distribution so as to avoid inefficiency. Most goods and services can be definable as scarce since individuals desire more of them than they already possess (scarcity is maintained by demand). Those that are readily abundant are referred to as free goods.

The scarcity of goods and services is brought about by factors such as the limited supply of resources (for example, water, land or people) and the limited capabilities of technology or human skill (for example, those needed for enhanced production). Sometimes the insufficiencies are a result of poor planning and execution. In such cases, the scarcity is considered artificial.

Scarcity is managed by making choices regarding value so that individuals can exchange resources in a system of trade. In ideal circumstances, pricing systems adjust accordingly, thereby maintaining the balance of supply and demand. Certain things require scarcity to maintain value, as is the case, for example, with diamonds, awards, even the money produced by central banks.
Goods (and services) that are scarce are called economic goods (or simply goods if their scarcity is presumed). Other goods are called free goods if they are desired but in such abundance that they are not scarce, such as air and seawater. Too much of something freely available can informally be referred to as a bad, but then its absence can be classified as a good, thus, a mown lawn, clean air, etc.
Economists study (among other things) how societies perform the allocation of these resources — along with how societies often fail to attain optimality and are instead inefficient.
Certain goods are likely to remain inherently scarce by definition or by design; examples include land and positional goods[2] such as awards generated by honor systems, fame, and membership of elites. These things are said to derive all or most of their value from their scarcity. Even in a theoretical post scarcity society, certain goods, such as desirable land and original art pieces, would most likely remain scarce. But these may be seen as examples of artificial scarcity, reflecting societal institutions. That is, the resource cost of giving someone the title of "knight of the realm" is much less than the value that individuals attach to that title.
On the other hand, that ease with which some goods can be obtained or replicated (for instance intellectual property) led to the introduction of artificial scarcity in the form of legal or physical restrictions which limit the availability of such goods.
Principle
I want now what I may not be able to get in the future.
How does it work?
If something is difficult to get, then getting it demonstrates to ourselves and others that we are in control of our environment. Threatening to take something away is showing the other person that you are in control. The desire of scarcity is thus the competitive urge to maintain control.
Aristotle knew this too, commenting in his 'Rhetoric':
'That is why what comes to us only at long intervals is pleasant, whether it be a person or a thing; for it is a change from what we had before, and, besides, what comes only at long intervals has the value of rarity.'
Controlling supply and demand
If you can control supply, then you have a significant lever on demand. The De Beers company buys huge quantities of diamonds on the world market, simply to keep them scarce so that their high price is maintained.
Scarcity must mean that
If something is not scarce, then it is not desired or valued that much. Praises from a teacher who seldom praises are valued more than praises from a teacher who is liberal with his or her praise.
Scarcity is non-linear process. As something becomes more scarce or less scarce, the desire for it does not change in a proportionate way.
If everything is scarce, then scarcity itself lacks its value and people become too used to it. Studies of retail sales have shown that if more than about 30% of goods have 'sale' sticker on them, the effectiveness of this method decreases.
Retail sales
'Whilst stocks last', 'This week only', 'Last one!'. Scarcity is a principle known by all retailers who milk it right down to the last drop. If something is rare, it seems we find it somehow more desirable.
A shortage of anything sends people scurrying to the shops to stock up (often fueling the shortage and keeping the spiral going).
Banned substances
Scarcity is the lack of something. When we realize that we do not have something, we desire it. Banning it only makes things worse.
Just telling someone that they should not do something makes it more desirable. When 'Lady Chatterley's Lover' was first published it got banned. Many black-market copies were sold and it made the author, D. H. Lawrence, famous.
People flock to see a heavily censored film. Music which is banned on radio stations shoots up the charts.
Competitive pressures
Competition uses the scarcity principle, as only one person or team can win. This also highlights the social nature of scarcity: we judge ourselves against others. When they have things we do not, we become jealous.
Parent-child games
Parents often try to control children in their rationing of attention and affection. Children soon pick up on this and play the game in reverse.
The natural rebelliousness of teenagers comes out in scarcity games as parents restricting what their children actually cause them to rebel. 'Don't you dare take those drugs' may actually be the wrong thing to say, particularly if the child has a contrarian preference.
This game continues in other forms as we grow to adulthood, and telling people not do to things perpetuates the 'banned substances' game.
So what?
You can ration pretty much anything, including goods, time, attention, friendliness, agreement and so on.
Create envy, showing how people have what you are selling. Indicate how the supply is running short as everyone else getting one.

The widespread use of definitions emphasizing choice and scarcity shows that economists believe that these definitions focus on a central and basic part of the subject. This emphasis on choice represents a relatively recent insight into what economics is all about; the notion of choice is not stressed in older definitions of economics. Sometimes, this insight yields rather clever definitions, as in James Buchanan's observation that an economist is one who disagrees with the statement that whatever is worth doing is worth doing well. What Buchanan is noting is that time is scarce because it is limited and there are many things one can do with one's time. If one wants to do all things well, one must devote considerable time to each, and thus must sacrifice other things one could do. Sometimes, it is wise to choose to do some things poorly so that one has more time for other things.
One way to see the importance of scarcity is to examine how various people have constructed utopias.
Scarcity occurs when people want more of something than is readily available. In economics, scarcity forces people to make choices, as everyone cannot have everything. Without scarcity, an economy cannot exist.

Scarcity occurs in every society and there is no society that is fully sufficient with the natural resources, that’s why we have trade between countries because every society tries to be sufficient with everything that is available in life. So scarcity is the essence of life and on scarcity so many things occurred such as economics and trade.

Scarcity can be a powerful thing. It can force you to make difficult choices. It can force you to go without. It can force you to pay more than you wanted to. It can force you to look elsewhere for the thing you want. The next time you discover that something you want isn't available, remember the idea of scarcity. What choice will you make?

References: * http://ingrimayne.com/econ/Introduction/ScarcityNChoice.html * http://www.socialstudiesforkids.com/articles/economics/scarcityandchoices1.htm * http://www.socialstudiesforkids.com/articles/economics/scarcityandchoices2.htm * http://www.ehow.com/facts_5175741_scarcity-economics_.html * http://www.iscid.org/encyclopedia/Economic_Scarcity * http://changingminds.org/principles/scarcity.htm * http://en.wikipedia.org/wiki/Scarcity