Difference Between Scarcity and Shortage
All profitable training is made up of the same things: production, distribution, and consumption. These three factors, if managed effectively, can result in the efficient use of resources within a given organization.
However, even the most efficient organizations suffer from time to time from some form of scarcity or shortage. Note that there is a difference between scarcity and shortage and we will explain how they differ in this article. But first, let’s look at their definitions.
Definition of Scarcity
Scarcity is defined as a naturally occurring limitation on a resource that cannot be replenished. Such resources are mostly of high value at all times irrespective of the level of demand placed on them. From another perspective, it can be defined as a phenomenon that states that unlimited human wants are to be satisfied with limited resources.
A very good example is land. It is a natural resource essential for both the survival and prosperity of humanity. It is also required for the maintenance of the terrestrial ecosystem. Because of human curiosity, which is infinite, land use and exploration keep increasing. But land is finite in nature, and as such, it keeps growing scarce. This means that there is a limitation on how much it can be used or explored.
Knowing that a resource is limited brings about the application of economics to make the most suitable choices under conditions of limitations. This is a common reaction to both shortage vs scarcity. Before this application, it is important to understand what type of scarcity one is dealing with. It could be demand-induced, supply-induced, or structural scarcity.
Definition of Shortage
Shortage is defined as the temporary inability to meet the demand for a replenishable product. In other words, the supply is less than the demand as a result of circumstances that are not beyond human control. In cases such as this, the market is said to be in a state of disequilibrium.
According to the definition, this state of disequilibrium is usually a temporary condition because the product can be replenished to bring the market back to its normal state of equilibrium. Scarcity vs shortage, when compared, seem similar, but they are not. The former is used to describe finite resources while the latter is used to describe infinite resources.
There are three main factors that may bring about a shortage.
- Decrease in supply
A temporary supply limitation of fresh fruits due to bad weather or an unfavorable crop season is a good illustration of this factor.
- Increase in demand
An example is terrible and destructive weather conditions that require people to take in family and friends from the impacted area for a while. This would lead to an increase in demand for items like food, personal effects, water, etc.
- Government-imposed price ceilings
This factor affects specified goods that have government-mandated legal minimum or maximum prices.
Scarcity vs Shortage Comparison Table
One look at this table and you’ll understand and be able to answer the question – what is the difference between a shortage and scarcity? This will also help you to see and refer to these terms professionally, especially in a formal setting.
|Basis of Comparison
|Availability of a resource in a finite quantity in its natural form
|A state of demands being higher than supply
|Market conditions initiated my human
|Permanent or lasts for a long time
|Mostly naturally occurring substances like gold, silver, etc
|Man-made goods and services
Conclusion of the Main Difference Between Scarcity vs Shortage
Have you ever asked yourself – “what is the difference between a shortage and scarcity?” Now you have your answer. To avoid mixing things up and using words interchangeably. You should note that the nature of the substance, goods or services largely explains how these terms are different from each other.