What is shortage?
In economic terms, a shortage is a condition where the quantity of a product or service demanded is greater than the quantity supplied at the market price. A shortage can be contrasted with a surplus and are often temporary. For instance, movie tickets may be in short supply today, but in a few days, they may be easy to come by.
Causes of shortage
The three common causes of shortage are as follows:
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Increase in demand (outward shift in the demand curve): For example, a new smartphone release causes a spike in demand, outpacing supply.
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Decrease in supply (inward shift in the supply curve): For example, a sudden oil refinery shutdown significantly reduces the supply of gasoline, leading to higher prices and fuel oil shortage.
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Government intervention: For instance, when the government implements price ceilings, it can lead to a reduction in the supply of various goods, as producers may find it unprofitable to sell at the mandated lower prices despite higher demand.
Types of shortage
Some typical types of shortage can be found within industries and sectors as below:
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Food
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Goods
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Housing
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Water
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Labour
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Energy
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Healthcare
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Technology
What is scarcity?
Scarcity is a fundamental concept in economics, as all societies face constraints on the resources they have available.
In reality, people make countless choices about almost everything they want. For instance, taking food is necessary, but a person may ask himself what type of food he should buy or if he should have dinner at a local restaurant. Therefore, wants are not only unlimited but also ever-changing.
Because wants are unlimited and resources are scarce, choices have to be made about how best to use these resources by both consumers and producers. As a result, a social science named Economics has been developed to understand and explain how people satisfy their wants with limited resources.
Examples of scarcity in economics
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Limited natural resources (e.g. freshwater)
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Limited land in urban area
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Skilled labor shortages in certain industries, such as technology and healthcare
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Limited transportation infrastructure in rural areas
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Limited public goods (e.g. libraries, public parks)
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Limited individual time to pursue multiple interests
Shortage vs Scarcity
In summary, scarcity and shortage are two economic concepts that are related but distinct. Scarcity refers to the limited availability of a resource, while shortage refers to a temporary deficit of a resource in a specific market or location. In other words, scarcity is a fundamental aspect of the economy, while shortage is a temporary market condition.
References
James, C 2024, Shortage: Definition, Causes, Types, and Examples, Investopedia, available at <https://www.investopedia.com/terms/s/shortage.asp>.
National Geographic n.d., Scarcity, National Geographic, available at <https://education.nationalgeographic.org/resource/scarcity/>.
Tejvan, P 2009, Scarcity in economics, Economic Help, available at <https://www.economicshelp.org/blog/586/markets/scarcity-in-economics/>.
