what is scarcity

What is Scarcity?

Learn about Scarcity with Rajesh Khanna
Namak Haram

Movie Case Study

Somnath (played by Rajesh Khanna) along with his wealthy friend, Vicky (played by Amitabh Bachchan) conspire to take revenge on a union leader head who humiliated Vicky. In the process, Somnath takes the position of a laborer in the mill. He is extremely disturbed after seeing the stark realities of life.

In this blog, Learning Perspectives will explore the meaning of scarcity.

What is Scarcity?

The word scarcity is derived from ‘scarce’ which means less in quantity. In business economics, you may find scarcity is related to factors that will drive the achievement of goals on both a small and a larger scale. Simultaneously, one may see a downward slope in the business if factors aren’t procured at the required stage of the production process.

During the 1960s, India had many economic challenges and faced food scarcity.

Scarcity reflects a lack of resources for a given commodity or factors of production.

Consequences of Scarcity:


With a lack of resources during the production process, a firm may fail in order to match the expected number of products to be manufactured. Moreover, it will reduce the efficiency of both the workforce and the machinery. Scarcity doesn’t only lower the optimum state of an organization but also reduces consumers’ interest in buying the product. 

For Example; Mr. A wants to buy a 4-BHK villa for his family, he signs a contract with the builder for full payment at the time of possession. Somehow the builder couldn’t manage to finish the initial structuring owing to the scarcity of labor. The buyer then dismisses the contract and buys an apartment for the same amount. 

Competitors Marketplace

Not just in real estate, scarcity can occur in business or manufacturing units too. If one manufacturer is unable to meet its customer demand, its substitute brands/products will manage to supply the necessities. 

For example, When you visit a local market to purchase bathing soap since there are hundreds of brands one wouldn’t stick with just one. 

Low Revenue 

A business organization may face lower revenue as its production capacity won’t be enough to meet the demand generated. In such scenarios, a business organization might shut its operation or face higher losses.

For example, In the first case, the builder incurred higher losses till the properly constructed villa, it wouldn’t be sold at its best price. 

Problems of Scarcity:

Individuals or groups of people must know how to use resources in the optimum way possible. Families must know whether to spend on a car or to invest in a fixed deposit. 

One must plan his budget with respect to his earnings. Businessmen must use adequate amounts of capital, labor, and raw materials to result in optimum production of goods or services. This problem of scarcity can be analyzed through various measures such as:

• Inventory Management

• Resources Procurement

• Supervision of Production Process 

• Demand and Supply Relationship 

How to Overcome Lack of Resourcefulness?

Planning for resources with a specific objective may result in no ‘scarcity’ during a certain period. 

Following are a few resources that if placed together result in extreme growth for a business organization:

1. Land & Labour:

Land and labor are two tangible resources that are primarily required for production plants to be established and run smoothly with ease of availability in procuring raw materials. 

Production land must be adequately far from the supplier’s warehouse. 

2. Capital:

A substantial amount is always kept aside by businesses to meet contingent situations. Capital is required to procure raw materials, market the product, repay dues with suppliers, transportation of finished goods to sellers, and meet the compliances of the business. 
Reserved amounts kept in businesses can be determined as Working Capital.
Working Capital, refers to funds that are used in running operational activities for a given period.

3. Natural Resources: 
Irrespective of the high demand for natural resources. Natural Resources are key factors of production for certain manufacturers such as organic farmers who don’t have enough land to make required production. 

4. Entrepreneurial Skills:

An individual having an entrepreneurial mindset will be a good resource as he/she could easily conduct business activities that need to be performed in an optimum way.  


We have read how scarcity can affect a major section of society. India still faces a scarcity of food. According to a Hindu report27.8% of India’s population suffered from moderate or severe food insecurity in 2014-16, and the proportion rose to 31.6% in 2017-19. “

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