Question

What is the difference between a shortage and scarcity? Select one: a. Scarcity will almost always exist, but a shortage will exist only if the price is kept below the equilibrium level. b. Scarcity is a result of two or more alternative uses, and quantities of supply and demand adjusting to flexible prices will create shortages. c. A shortage will exist when a good is scarce. d. There is no distinction between the two. They are the same thing.

Answer 1

Answer: Option A

Explanation: Scarcity can be defined as limited availability of commodity in the market when there is demand for that particular commodity. In economics it means the basic problem of an economy which results due to limited resources and limitless wants.

When the demand for a commodity is greater than its supply then there is said to be shortage of that commodity.

Therefore, scarcity will always exist as the resources are limited but shortage happen due to miss-pricing. Equilibrium price is the price in which the demand of a commodity is equal to its supply thus when the price is less than equilibrium the demand will automatically exceeds its supply leading to shortage in market.