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Scarcity

Scarcity is an economic principle that refers to infinite wants contrasted with finite resources.

Expanded Definition

Most people probably understand the concept of scarcity without realizing what it is called. At its core, scarcity is simply about how choices are made.

For example, let's say you are a fan of books. Now, you might like to own every book in the world, however, you know this to be impractical as you are likely lacking the ability to do so in at least four ways. One, you probably don't have enough money to purchase all these books (capital); two, some books may not even be for sale or may be difficult to obtain(labor); three you may not have the time (labor again) or the means to store all of them (land). So what do you do to compensate for your probable lack of adequate resources (land, labor and capital)? Well you prioritize and perhaps buy only the books you are most interested in owning, and then if you have enough resources left over you start purchasing some of your lesser favorites. Chances are you already engage in this behavior.

On the flip side in our example, a book seller must take this into account as well; he or she might want to stock every book in the world to give their customers the best selection. But again the book seller is limited by their capital, land and labor, therefore they must prioritize and stock only the books that are most likely to generate sales. This principle spills over to book publishers as well, as again they are limited by the three resources, so that dictates which books they publish.

Scarcity is thus a balancing act between wants and means to acquire those wants.

Criticism

A notable criticism of the scarcity principle is the underlying assumption that people have unlimited wants. In our previous example it is more likely that there are very few individuals who even would like to own every book in the world even if they had the means to do so. Furthermore, the number of books a person might want to own could be influenced by external factors such as advertising, societal pressure or individual preference. Modern economics does not consider this significant enough to negate the principle.

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