Meditations and Learnings

Meditations and Learnings

Shortages versus Scarcity

Shortages and scarcity are not synonymous. Nor do the processes depend on one another.
Scarcity is when there are too few goods, relative to the population. Shortages result from the prices of the product.
Shortages can occur in the face of abundancy if the price is kept artificially low, usually by the government. Price controls of this manner direct product to those who do not most desire it, resulting in a shortage for those who do.
Scarcity can also occur without a resultant shortage. If half of the houses are wiped out, and the government does not prevent a natural price increase in the remaining housing, there will be no shortage. The houses at the higher price will be less desirable for buyers; demand will subsequently drop. Meanwhile, supply will increase as a higher number of homeowners acknowledge their lucrative asset, choosing to rent or sell.