Scarcity

Also called: Limited resources · Topic: Scarcity, Choice and Economic Systems · NCERT: Class 9, Ch 8 "Building Blocks in Economics: The Problem of Choice"; Class 11, Ch 1 "Introduction (Statistics for Economics)"; Class 11, Ch 8 "Use of Statistical Tools"; Class 12, Ch 1 "Introduction (Microeconomics)"

Meaning

Scarcity is the condition in which the resources of a person or a society are limited compared with their wants, so they must use these limited resources in the best possible way.

It is the root of every economic problem. Class 11 NCERT says that without scarcity there would be no need to choose, and so no economics at all.

Formula of the economic problem: Unlimited wants + scarce resources + alternative uses = problem of choice.

Explanation

How scarcity arises: wants vs resources

• Wants are unlimited. When one want is met, a new one appears.
• Ladder of wants: bicycle → motorbike → car → bigger car or a second house.

• Wants grow with income and with what other people have.

• Resources are limited. Resources are goods and services used to produce other goods and services. Economists also call them factors of production or inputs.

• Natural resources come from nature: water, coal, land, minerals.

• Human-made resources are made by people: capital (machines, buildings, tools) and technology.

• Time is also a scarce resource. Everyone has only 24 hours a day. An hour spent studying cannot also be spent working or resting.

• Classic definition (Lionel Robbins): "Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses" [3][2].
• It comes from his book An Essay on the Nature and Significance of Economic Science (1932) [3].

• Ends = wants. Scarce means = resources. Alternative uses = choice.

• If resources were unlimited, they would be free. People do not have all the arable land (land fit for farming), petroleum or platinum they want, so these must be rationed (shared out in limited amounts) [2].

Scarcity is relative, not absolute

• Scarcity does not mean a thing is rare in absolute numbers. It means there is not enough of it compared with what people want.
• A rich country also faces scarcity, because its wants grow as fast as its means, or faster.
• A thing can exist in large amounts and still be scarce if people want even more of it.
• Everyday signs of scarcity (Class 11): long queues at railway booking counters, crowded buses and trains, shortages of essential goods, a rush for tickets to a new film.

• In each case, more people want something than there is to go round.

• Aladdin's lamp: the genie granted every wish, so Aladdin never had to choose. Real life has unlimited wants but no magic lamp.

From scarcity to choice and opportunity cost

• Scarcity alone is not enough to create a choice. The resource must also have alternative uses.
• Land, labour, water and fertiliser can grow food crops or non-food crops such as rubber, cotton and jute (Class 11).

• Steel can go into medical equipment, aircraft or refrigerators (Class 9).

• The logic:

• If resources had only one use → nothing to choose, even if they are scarce.

• If resources were not scarce → every use could be met at once.

• Worked example: pocket money (Class 11 idea)

• Pocket money: ₹500 a month.
• Wants: film ticket ₹300 + book ₹250 + snacks ₹200 = ₹750.
• Gap: ₹750 − ₹500 = ₹250 of wants cannot be met. This gap is scarcity.
• The student picks film + snacks = ₹500. The book is given up.

• The book (₹250) is the opportunity cost (the value of the next-best option given up).

• At the society level, choices between competing uses lead to the central problems of an economy: what to produce, how to produce and for whom.

What makes scarcity sharper or milder

• Sharper:
• Population growth set against a fixed resource base. Each person gets a smaller share.
• Rising wants that come with higher income.

• A poor resource base. A labourer who owns only her labour faces harsher choices than a family farm with land, tools and bullocks (Class 12).

• Milder:

• More efficient use of resources, such as better technology or less waste.

• Free goods can become economic goods. When a plentiful thing becomes scarce, it starts to carry a price.

• Clean air in a polluted city → people buy air purifiers.

In India

• Water: scarcity measured by the Central Water Commission (CWC)
• Study: "Reassessment of Water Availability in India using Space Inputs, 2019" [4][5].
• Average annual per capita water availability (water available for each person in a year):

Year	Cubic metres per person per year
2001	1,816
2011	1,545
2021	1,486 (assessed)
2031	1,367 (projected)

• Thresholds: below 1,700 m³ per person per year = water-stressed. Below 1,000 m³ = water-scarce [4][5].
• India has been water-stressed since before 2011 and is moving towards the scarcity line [4][5].
• Cause: total water supply stays about the same, but the population keeps growing. Per capita availability has been falling steadily since 1951 [4][5].

• This is a textbook case of relative scarcity. The water still exists, but wants have grown faster.

• Land: scarcity measured by the Agriculture Census

• The average size of an operational holding (the land one farmer actually cultivates) fell from 2.28 ha (1970-71) to 1.84 ha (1980-81), 1.41 ha (1995-96), 1.15 ha (2010-11) and 1.08 ha (2015-16) [6].
• As population grows, land keeps getting divided, so the average holding is expected to fall further [6].

• What this means for a farm family:

  • Less land in each generation → smaller output.
  • Smaller output → the choice of what to grow (food for the family or crops to sell) becomes harder.

• Economic systems: before 1991, India's Five-Year Plans let the state make choices under scarcity. The 1991 reforms moved these choices towards the market and prices. The root problem, scarcity, stayed the same.

Don't confuse with

• Shortage: a temporary gap in supply of a good, such as a ration-shop shortfall. Scarcity is permanent and universal. It exists even when shelves are full, because wants are always bigger than resources.
• Poverty: lack of income to meet basic needs. Scarcity affects rich and poor alike. Rich countries also face it.
• Opportunity cost: the value of the next-best option given up. It is the result of scarcity plus choice, not scarcity itself.
• Free good: so plentiful that it has no price and no opportunity cost, such as air in normal conditions. An economic good is scarce and has a price, such as bottled water.

Prelims Hooks

• Scarcity is relative, not absolute. Trap: "Scarcity exists only in poor countries" is wrong.
• Robbins (1932): economics studies "ends and scarce means which have alternative uses". Book: An Essay on the Nature and Significance of Economic Science [3].
• Problem of choice = scarcity + alternative uses. A scarce resource with only one use gives no choice.
• Water thresholds: below 1,700 m³ per person per year = water-stressed. Below 1,000 m³ = water-scarce. India: 1,545 m³ (2011), 1,486 m³ (2021), 1,367 m³ (2031, projected). Source: Central Water Commission, 2019 study [4][5].
• Average operational holding: 1.08 ha (2015-16), down from 2.28 ha (1970-71) (Agriculture Census) [6].
• Time is a scarce resource too (Class 9). Resources are split into natural (water, coal) and human-made (capital, technology).

Mains Points

• Scarcity is why both planning and pricing exist (GS-III).
• Every economy must decide what, how and for whom to produce.
• India's Five-Year Plans answered through the state. After the 1991 reforms, the answer moved towards the market.

• Either way, the root problem (scarcity) did not change. Only the method of choosing did.

• India's natural-resource scarcity is growing, and it is relative (GS-III).

• Per capita water fell from 1,816 m³ (2001) to 1,486 m³ (2021) [4][5]. Farm holdings shrank to 1.08 ha (2015-16) [6].
• Both come mainly from population growth set against a fixed resource base.
• Policy answer: use resources more efficiently (micro-irrigation, water pricing, land consolidation) instead of only trying to increase supply.

• Land-use trade-off: food crops backed by MSP (Minimum Support Price) compete with cash crops, biofuel crops, industry and cities. Each choice has an opportunity cost, such as lower farm income, fewer exports or more water use.

• Equity concern when free goods become economic goods (GS-II/III).

• When clean air and safe water need purifiers or bottled water, the rich can pay and the poor cannot.
• This supports public provision and regulation, such as pollution control and piped drinking water.

Related concepts

• Needs
• Wants
• Goods
• Services
• Resources
• Alternative uses of resources
• Problem of choice

Read more

• Wants, resources and scarcity: the root of the economic problem