Scarcity Economy

A scarcity economy occurs when the resources available—such as goods, services, or raw materials—are limited compared to the demand for them. This imbalance means choices must be made about how to allocate these limited resources efficiently. Scarcity forces individuals, businesses, and governments to prioritize and ration resources, often leading to higher prices and competition. It is a fundamental aspect of economics because it drives decision-making and influences how societies produce, distribute, and consume goods and services. Without scarcity, the concept of supply and demand would not exist, as resources would be unlimited.