Scarcity is a critical economic situation in which demand for a product exceeds supply; for example, when gas stations run out of fuel, or even more importantly, when supermarket shelves are empty. Scarcity occurs when the readily available supplies are no longer able to satisfy the consumers' demand. Various economic, natural, political and even behavioral factors contribute to this problem, so its solution is neither simple nor immediately effective to stabilize the market.
Determine the reason for the problem. Scarcity can occur when the outdated market system prevents the quick replenishment of stores, when natural disasters affect farming production, when imports are no longer possible due to political or economic policies, or when consumers unexpectedly buy large quantities of specific products.
Modernize the distribution system. Villages, small towns and islands are the most frequent victims of scarcity as no roads exist for big cargo trucks to safely transport goods, nor ports for cargo ships to approach.
Adjust prices so they correspond to society's new conditions. In China, for example, prices of consumer goods have been extremely cheap. But with the emergence of a huge middle class after the country's economic boom, if there is no rise in prices to discourage buyers from unnecessary spending, then the resources will become increasingly scarce.
Increase imports when domestic supplies are not enough. For example, tea production in the United Kingdom cannot satisfy the citizens' demand. It's essential to import tea from India and China. Try to resolve political issues that prevent foreign economies from doing business with your country, as happened in the 1973 oil crisis when OPEC and other oil-producing countries placed an embargo on oil to the United States because of its support for Israel during the Yom Kippur War.
Restrict demand artificially with rationing. Rationing is the system of using coupons, tokens or other substitutes for money to buy specific products. Governments distribute these coupons according to the needs of each citizen and his family. Rationing is a temporary emergency measure when supply cannot satisfy demand and no effective solution is immediately available. Several countries rationed food and other products during and after World War II. The United States printed ration stamps during the oil crisis but never used them.
Tips & Warnings
- A common fact in all causes of scarcity is consumers' demand, which can reach extreme levels for nonessentials such as second or third family cars, subsequently consuming more fuel. Raising the issue of unreasonable market behavior can minimize the risk of future shortages.
- Photo Credit we are out of coffee image by Georgios Alexandris from Fotolia.com