20+ Differences between Scarcity and Shortage (Explained)

To anyone who does not have a basic idea of economics, it might seem that the two terms, Scarcity and Shortage, are synonyms. However, even if you search for the literal meanings of the words, they are more or less the same. 

Only after going away from the dictionary meanings and acquiring knowledge from the perspective of economics will you be able to tell the two concepts apart. 

Differences Between Scarcity And Shortage

Comparison Between Scarcity And Shortage

Conceptual MeaningScarcity indicates the finite nature of resources.Shortage indicates the dearth of a particular good at a given price.
CauseIt occurs naturally.It occurs because of the changes in market forces of supply and demand.
TermScarcity is perpetual. A shortage occurs temporarily.
SolutionScarcity cannot be rectified.It can be rectified.
ExampleCoal is scarce.The labor shortage is a classic example.

Understanding Scarcity And Shortage

What Is Meant by Scarcity?

Human wants are limitless. But the resources that are required to fulfill those wants are limited. This situation of limited resources but unlimited wants is referred to as scarcity. 

While studying economics, the scarce nature of resources plays a crucial role. In other words, economics is the study of how the allocation of scarce resources can take place to meet the needs of the people. 

What Is Meant by Shortage?

A market is in equilibrium when the number of goods or services demanded equals the number of goods or services supplied. The point at which these two become equal gives the equilibrium price.

However, the situation of shortage sets in when the quantity demanded is more than the quantity supplied. As a result, it brings about a shortage of goods or services.

Significant Differences Between Scarcity and Shortage

Concepts in Economics

  • Scarcity- The concept of scarcity indicates how in a society, the resources are finite, but people’s wants are infinite. It gives rise to the need to allocate resources to fulfill people’s necessities. Here, economics and the work of economists come in.
  • Shortage- Shortage is a market situation. It emerges when the number of goods demanded surpasses the quantity supplied. In such a case, the market is no longer in equilibrium, and a shortage of goods arises.


  • Scarcity- Scarcity is generally natural. However, it can be demand-induced, which means that the rise in the consumption of resources leads to their scarcity. Scarcity can also be supply-induced.

    Supply-induced scarcity occurs when the overexploitation of resources results in their depletion. Some sections of society do not have equal access to resources. It is the third kind of scarcity, known as structural scarcity.
  • Shortage- The supply and demand market forces are primarily responsible for shortages. A shortage occurs in two situations.

    The first situation is when there is a decrease in supply, and the second is when demand increases to the extent that it exceeds supply.

    There are also specific government policies that trigger a shortage, like fixing the prices of some goods or services.
Causes Scarcity And Shortage


  • Scarcity- Scarcity is a permanent situation. That is why economic decisions involve analyzing how scarce resources can be used to produce goods and how they can be allocated.
  • Shortage- Shortage is a temporary situation that can be redressed.


  • Scarcity- Some common examples of scarcity include the scarcity of resources like land, water, and petroleum. 
  • Shortage- The US economy has experienced several shortages in its history. The most recent shortage is a labor shortage that erupted in 2021 after the outbreak of the covid-19 pandemic.

FAQs (Frequently Asked Questions)

1. What causes scarcity?

The three fundamental causes of scarcity are; a rise in the consumption of resources, a fall in availability, or unequal distribution of the resources.

2. Are scarcity and poverty the same?

While poverty makes it difficult for people to access even the necessities required to sustain life, scarcity is a permanent condition where society has limited resources that are insufficient to meet the wants of all people.

3. How can the problem of shortage be solved?

Market equilibrium is the condition where the quantity supplied equals the quantity demanded. The point of equilibrium gives the price of the good.

During the shortage of goods in the market, their price must go up. It will provide a push to the supply and reduce demand.

4. What is the opposite situation of shortage?

The opposite situation of shortage is surplus. It refers to a situation where the supply of a good exceeds its demand. 

5. Is scarcity the same as shortage?

The simplest way to discern the critical differences between scarcity and shortage is by understanding that scarcity cannot be rectified as it is an entirely natural and endless situation.

But shortage occurs as a result of market problems and is a short-term situation.

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