Scarcity, or the lack of sufficient resources, affects virtually all aspects of life, as people must constantly acquire wealth to pay for needs that are in short supply. According to Western Reserve Public Media’s “Economics Academy 101,” scarcity is the first lesson in economics. Scarcity leads to the law of supply and demand, which underpins all material transactions.
Scarcity sets up the entire framework for modern economics. If the world had more food, for example, than necessary to feed every man, woman and child, it would be relatively easy to convince people to provide some. By contrast, if food is in short supply, as it is in the real world, you must purchase food from people by trading them something of value in exchange for the food. Without scarcity, goods and services have no value because they are abundant.
Scarce items are said to be at low supply. When the supply of items is low, the relative demand for the item increases. The reverse principle also works, as an increase in the supply of an item causes the demand to fall. All goods and services are subject to the laws of supply and demand, which exists only because of scarcity.