Think of a thing that you like to have. 

You might have a favorite food, like ice cream.  You might have a favorite game or toy, like an Xbox.  Or you might enjoy a favorite hobby, like reading Harry Potter books. 

What would your life be like if you suddenly couldn’t get any more of your favorite thing?

People deal with this kind of problem every day.  It’s called scarcity.  It comes from the word scarce, which means there isn’t enough of something. 

Can you think of something that we like but there may not be enough for everyone to have one of their own?

Economists, people who study businesses and how we spend money to buy and sell things, would say that anything that costs money and is hard to get is scarce.

Supply and Demand

Supply is the amount of something we have available to sell or trade.  Selling or trading something you have to someone that wants it is called distribution, which comes from the word distribute.  So, if you have five comic books available to distribute, your supply is 5.

Demand is how much of something people want.  If someone wants to buy two of your comic books, the demand is 2.

For how much could you sell each comic book?

What if five people each wanted two comic books?  What would the demand be?

Would this change the price of your comic books?  How?  Why?

So how does scarcity relate to supply and demand?

If we do not have enough supply to distribute, our supply would be scarce.  We would not have enough to distribute to people demanding what you have.

Sometimes this might be because the item is not available at that time.  Some fruits and vegetables are not always available all the time because they grow at different times of the year.  Strawberries are grown most from the months of April through June.  We have many farmers providing a supply of strawberries.  People love to eat strawberries in the Summer so demand is high too.  Supply and demand are probably about equal at this time. 

But, what happens if you want to have strawberries in December?

What do you think happens to price when we have more supply than demand?  What if you have 5 toys to sell but have someone interested in buying only 1 toy?  Would your price go up or down?

What if you have more demand than supply?  What if you have 1 toy to sell and 5 people want to buy it?  Would your price go up or down?

People might pay $1 for your toy, but if they can buy the toy somewhere else for less, you might have to bring your price down.

However, if the toy is scarce, you might be able to increase the price.  If someone can get the toy many places, the price might have to decrease.

If supply and demand are almost the same or equal, then the price is neither too high or too low for distribution.

Adapted from the article Scarcity and Choices:

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