Friday, 13 June 2014

Notion of Scarcity and its effects on Economy

What is Scarcity?
Scarcity is a state of the economy where the available goods/ services and resources are unable to meet all the needs and requirements of public. It is a case of insufficiency. Requirements of people are more as compared to the available resources of the country or that particular economy. It is a condition of insufficient stock, insufficient production and insufficient availability of all resources including funds.

Factors contributing to Scarcity
  • It is geographically created or situated like that with low resources.
  • Lack of technology and mining facilities to unearth the resources and produce the end products.
  • Ever increasing population, with no corresponding improvement in production and services.
  • Impact of natural calamities destroying resources and produce.
  • Lack of efficient planning and management.
So you can see that scarcity of resources is both geographical and man-made. It is either natural element or weakness of that country and may be also due to chaos in administration.

How to tackle the problem of scarcity?

If the problem is due to natural elements such as destined by default to be poor in natural resources, then we may not be able to solve it easily. The available option is either to import raw materials and resources from other countries and produce finished goods in your country or to import finished goods directly from them. You may have to consider the cost factor also to be economical. If the cost of production on importing raw materials and turning them into finished goods is lower or equal to the cost of imported finished goods, then you can opt for importing raw materials and produce at your end as it has the benefit of giving employment to your workforce. If, on the other hand, you realize that cost of importing finished goods is much lower, then you should import the finished goods to tackle the situation.

In case of other than natural elements contributing to the scarce resources of a country, there should be many factors that need deep understanding and analysis before finding and formulating solutions.
  • In case of floods, rains and droughts contributing to destruction of stocks and resources, you must think over solutions to tackle the problem. Collecting the statistics of frequency and periodicity of these calamities can help you in formulating preventive measures like constructing dams and reservoirs, adapting techniques of rainwater harvesting and irrigation canals, water reservoirs and ponds to store water for off season usage, etc. These techniques can be of much help in solving the scarcity problem to some good extent.
  • If the problem is man-made like increasing population or congestion of population at some places, scarcity can be met out by controlling population or increasing the production and supply of goods by transportation and transhipment from other places.
  • Inefficiency in management and administration can be resolved through proper training programs and active participation of workers and management to remove bottlenecks.
  • Proper cost control study and analysis can reduce the fund problems which may contribute to scarcity if uncontrolled.
From the above, you are able to realise that the notion of scarcity is both natural and artificial. Artificial in the sense that it is created due to improper planning and administration and lack of knowledge. In some cases, scarcity may be intentionally created through corrupt methods to create black marketeering. 

But normally scarcity can be resolved through better planning and administration. Better planning is possible through a deep review of all the economic factors prevailing in the environments concerned and through formulating suitable principles and norms for application under particular conditions and situations.

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