Shortage

In economics, a shortage or excess demand is a situation in which the demand for a product or service exceeds its supply in a market. It is the opposite of an excess supply (surplus).

Escasez en Venezuela, Central Madeirense 8
A 2014 image of product shortages in Venezuela.

Definitions

In a perfect market (one that matches a simple microeconomic model), an excess of demand will prompt sellers to increase prices until demand at that price matches the available supply, establishing market equilibrium[1]. In economic terminology, a shortage occurs when for some reason (such as government intervention, or decisions by sellers not to raise prices) the price does not rise to reach equilibrium. In this circumstance, buyers want to purchase more at the market price than the quantity of the good or service that is available, and some non-price mechanism (such as "first come, first served" or a lottery) determines which buyers are served. So in a perfect market the only thing that can cause a shortage is price.

In common use, the term "shortage" may refer to a situation where most people are unable to find a desired good at an affordable price, especially where supply problems have increased the price. "Market clearing" happens when all buyers and sellers willing to transact at the prevailing price are able to find partners. There are almost always willing buyers at a lower-than-market-clearing price; the narrower technical definition doesn't consider failure to serve this demand as a "shortage", even if it would be described that way in a social or political context (which the simple model of supply and demand does not attempt to encompass).

Causes

Shortages (in the technical sense) may be caused for the following:

Effects

Decisions which result in a below-market-clearing price help some people and hurt others. In this case, shortages may be accepted because they theoretically enable a certain portion of the population to purchase a product that they couldn't afford at the market-clearing price. The cost is to those who are willing to pay for a product and either can't, or experience greater difficulty in doing so.

In the case of government intervention in the market, there is always a trade-off with positive and negative effects. For example, a price ceiling may cause a shortage, but it will also enable a certain percentage of the population to purchase a product that they couldn't afford at market costs. Economic shortages caused by higher transaction costs and opportunity costs (e.g., in the form of lost time) also mean that the distribution process is wasteful. Both of these factors contribute to a decrease in aggregate wealth.

Shortages may cause:

  • Black (illegal) and Grey (unregulated) markets in which products that are unavailable in conventional markets are sold, or in which products with excess demand are sold at higher prices than in the conventional market.
  • Artificial controls of demand, such as time (such as waiting in line) and rationing.
  • Non-monetary bargaining methods, such as time (for example queuing), nepotism, or even violence.
  • Price discrimination.
  • The inability to purchase a product, and subsequent forced saving.

Examples

Citizens of Caracas, Venezuela searching for food in garbage in 2016
  • Rationing in the United Kingdom occurred mainly during and after the world wars
  • From 1920 to 1933 during prohibition in the United States, the creation of a black market for liquor was created due to the low supply of alcoholic beverages.
  • During the 1973 oil crisis, during which long lines and rationing was used to control demand.
  • In the former Soviet Union during the 1980s, prices were artificially low by fiat (i.e., high prices were outlawed). Soviet citizens waited in line (or "queued") for various price-controlled goods and services such as cars, apartments, or some types of clothing. From the point of view of those waiting in line, such goods were in perpetual "short supply"; some of them were willing and able to pay more than the official price ceiling, but were legally prohibited from doing so. This method for determining the allocation of goods in short supply is known as "rationing".
  • From the mid-2000s through the 2010s, shortages in Venezuela occurred, due to the Venezuelan government's economic policies;[2] such as relying on foreign imports while creating strict foreign exchange controls, put price controls in place and having expropriations result with lower domestic production. As a result of such shortages, Venezuelans had to search for products, wait in lines for hours and rationing was initiated, with the government allowing the purchase of a certain amount of products when it´s available, through fingerprint recognition.[3][4][5]

Whether an economic shortage of a certain good or service is beneficial or detrimental to society often depends on one's ethical and political views. For instance, consider the shortage of recreational drugs discussed above, and the controversies around the use of such drugs. Likewise, consider the economic shortage of cars in the Soviet Union during the 1980s: On the one hand, people had to wait in line to buy a new car; on the other hand, cars were more affordable than they would have been at market prices.

Shortages and "longages"

Garrett Hardin emphasised that a shortage of supply can just as well be viewed as a "longage" of demand. For instance, a shortage of food can just as well be called a longage of people (overpopulation). By looking at it from this view, he felt the problem could be better dealt with.[6]

Labour shortage

In its narrowest definition, a labour shortage is an economic condition in which employers believe there are insufficient qualified candidates (employees) to fill the marketplace demands for employment at a wage that is mostly employer-determined. Such a condition is sometimes referred to by economists as "an insufficiency in the labour force." An ageing population and a contracting workforce and a birth dearth may curb U.S. economic expansion for several decades, for example.[7]

Wage factors

Wage levels have been suggested as one way to measure a labour shortage. However, that often does not match people's common perceptions. For example, if wages alone are the best measure of labour shortages, then that would imply that doctors, instead of farm workers, should be imported because doctors are far more expensive than farm workers. However, there are institutionally-imposed limits on the number of doctors that are allowed to be licensed. If foreign migrant workers were not allowed into a nation, farm wages may go up but probably not enough to approach the wages of doctors.

The Atlantic slave trade (which originated in the early 17th century but ended by the early 19th century) was said to have originated from perceived shortages of agricultural labour in the Americas (particularly in the Southern United States). It was thought that bringing African labor was the only means of malaria resistance available at the time.[8] Ironically, malaria seems to itself have been introduced to the "New World" via the slave trade.[9]

See also

References

  1. ^ Tucker (2014) Economics Today
  2. ^ "Venezuela seizes warehouses packed with medical goods, food". Reuters. 2014-10-24. Retrieved 2015-12-07.
  3. ^ "Why are Venezuelans posting pictures of empty shelves?". BBC. 8 January 2015. Retrieved 10 January 2015.
  4. ^ Cawthorne, Andrew (21 January 2015). "In shortages-hit Venezuela, lining up becomes a profession". Reuters. Retrieved 17 June 2015.
  5. ^ Schaefer Muñoz, Sara (22 October 2014). "Despite Riches, Venezuela Starts Food Rationing; Government Rolls Out Fingerprint Scanners to Limit Purchases of Basic Goods; 'How Is it Possible We've Gotten to This Extreme'". Dow Jones & Company Inc. The Wall Street Journal. Retrieved 11 November 2014.
  6. ^ Video Interview with Garrett Hardin: Longages and Overpopulation Predictions Educational Communications program 803, 1990
  7. ^ Shrinking labour force may curb U.S. expansion for two decades
  8. ^ "As American as…Plasmodium vivax?"
  9. ^ "UCI: New World malaria linked to slave trade."
  • Kornai, János, Socialist economy, Princeton University Press, 1992, ISBN 0-691-00393-9
  • Kornai, János, Economics of Shortage, Amsterdam: North Holland Press, Volume A, p. 27; Volume B, p. 196 .
  • Gomulka, Stanislaw: Kornai's Soft Budget Constraint and the Shortage Phenomenon: A Criticism and Restatement, in: Economics of Planning, Vol. 19. 1985. No. 1.
  • Planning Shortage and Transformation. Essays in Honor of Janos Kornai, Cambridge, Massachusetts: MIT Press, 2000
  • Myant, Martin; Drahokoupil, Jan (2010), Transition Economies: Political Economy in Russia, Eastern Europe, and Central Asia, Wiley-Blackwell, ISBN 978-0-470-59619-7

External links

1979 oil crisis

The 1979 (or second) oil crisis or oil shock occurred in the world due to decreased oil output in the wake of the Iranian Revolution. Despite the fact that global oil supply decreased by only ~4%, widespread panic resulted, driving the price far higher. The price of crude oil more than doubled to $39.50 per barrel over the next 12 months, and long lines once again appeared at gas stations, as they had in the 1973 oil crisis.In 1980, following the outbreak of the Iran–Iraq War, oil production in Iran nearly stopped, and Iraq's oil production was severely cut as well. Economic recessions were triggered in the United States and other countries. Oil prices did not subside to pre-crisis levels until the mid-1980s.

After 1980, oil prices began a 20-year decline, except for a brief rebound during the Gulf War, eventually reaching a 60 percent fall-off during the 1990s. As with the 1973 crisis, global politics and power balance were impacted. Oil exporters such as Mexico, Nigeria, and Venezuela expanded production; the Soviet Union became the top world producer; North Sea and Alaskan oil flooded the market. It seemed that the United States of America and Norway had much more oil reserves than forecasted in the 1970s. OPEC lost influence.

2000s energy crisis

From the mid-1980s to September 2003, the inflation-adjusted price of a barrel of crude oil on NYMEX was generally under US$25/barrel. During 2003, the price rose above $30, reached $60 by 11 August 2005, and peaked at $147.30 in July 2008. Commentators attributed these price increases to many factors, including Middle East tension, soaring demand from China, the falling value of the U.S. dollar, reports showing a decline in petroleum reserves, worries over peak oil, and financial speculation.For a time, geopolitical events and natural disasters had strong short-term effects on oil prices, such as North Korean missile tests, the 2006 conflict between Israel and Lebanon, worries over Iranian nuclear plans in 2006, Hurricane Katrina, and various other factors. By 2008, such pressures appeared to have an insignificant impact on oil prices given the onset of the global recession. The recession caused demand for energy to shrink in late 2008, with oil prices collapsing from the July 2008 high of $147 to a December 2008 low of $32. However, it has been disputed that the laws of supply and demand of oil could have been responsible for an almost 80% drop in the oil price within a 6 month period. Oil prices stabilized by August 2009 and generally remained in a broad trading range between $70 and $120 through November 2014, before returning to 2003 pre-crisis levels by early 2016.

2019 Indian heat wave

Since the middle of May 2019, India has been facing a severe heat wave. It is one of the hottest and longest heat waves since the country began recording weather reports. The highest temperatures occurred in Churu, Rajasthan, reaching up to 50.8 °C (123.4 °F), a near record high in India. As of 12 June 2019, the heat wave had lasted for over 32 days, making it the second-longest ever recorded.As a result of hot temperatures and inadequate preparation, more than 184 people have died in the state of Bihar, with many more deaths reported in other parts of the country.The heat wave has coincided with extreme droughts and water shortages across the country. In mid-June, reservoirs that previously supplied Chennai had run dry, leaving millions without reliable access to water. The water crisis has been exacerbated by high temperatures and lack of preparation, causing protests and fights that have led to people being killed, stabbed and beaten.

Angostura bitters

Angostura bitters (English: ) is a concentrated bitters (herbal alcoholic preparation) based on gentian, herbs and spices, by House of Angostura in Trinidad and Tobago. It is typically used for flavouring beverages or, less often, food. The bitters were first produced in the town of Angostura (now Ciudad Bolívar, Venezuela), hence the name, but do not contain angostura bark. The bottle is recognisable by its distinctive oversized label. 'Angostura' is Spanish for 'narrowing', the town of Angostura having been located at the first narrowing of the Orinoco River.

Artificial scarcity

Artificial scarcity is the scarcity of items that exists even though either the technology for production or the sharing capacity exists to create a theoretically limitless or at least greater quantity of production than currently exists. The most common causes are monopoly pricing structures, such as those enabled by laws that restrict competition or by high fixed costs in a particular marketplace. The inefficiency associated with artificial scarcity is formally known as a deadweight loss.

Banana ketchup

Banana ketchup or banana sauce is a popular Philippine fruit ketchup condiment made from mashed banana, sugar, vinegar, and spices. Its natural color is brownish-yellow, but it is often dyed red to resemble tomato ketchup. Banana ketchup was made when there was a shortage of tomato ketchup during World War II, due to lack of tomatoes and a comparatively high production of bananas.

Bellandur

Bellandur is a suburb in south-east Bangalore, Karnataka India. It is bounded by HSR Layout to the west, Devarabisanahalli to the east, Sarjapur Road to the south, and the Bellandur Lake to the north. The Bellandur Lake is the largest lake in Bangalore, and separates Bellandur from the HAL Airport. The Outer Ring Road passes through Bellandur, making the area an important transit point between east and south Bangalore.

Initially a rural area, Bellandur has recently experienced a sharp rise in population and real estate development as a result of Bangalore's information technology (IT) boom. Although most of Bellandur's housing contains modern facilities, the suburb faces challenges such as water shortage, heavy traffic, and poor drainage which has resulted in severe pollution of Bellandur Lake. The Bruhat Bengaluru Mahanagara Palike (BBMP) has constructed several borewells in Bellandur in attempt to mitigate the water shortage.

Eggo

Eggo is a brand of frozen waffles owned by the Kellogg Company, and sold in North America. Several varieties are available, including homestyle, miniature, cherry, blueberry, strawberry, vanilla bliss, brown sugar cinnamon, apple cinnamon, buttermilk, chocolate chip, and Thick And Fluffy.Other than waffles, Eggo also produces a selection of pancakes, French toast, and egg and cheese breakfast sandwiches, of which varieties include ham or sausage.

By mid-June 2009, Eggo had a 73% share of the frozen waffle market in the United States.

Energy crisis

An energy crisis is any significant bottleneck in the supply of energy resources to an economy. In literature, it often refers to one of the energy sources used at a certain time and place, in particular those that supply national electricity grids or those used as fuel in vehicles.

Industrial development and population growth have led to a surge in the global demand for energy in recent years. In the 2000s, this new demand — together with Middle East tension, the falling value of the U.S. dollar, dwindling oil reserves, concerns over peak oil, and oil price speculation — triggered the 2000s energy crisis, which saw the price of oil reach an all-time high of $147.30 a barrel in 2008.

Family medicine

Family medicine (FM), formerly family practice (FP), is a medical specialty devoted to comprehensive health care for people of all ages; the specialist is named a family physician or family doctor. In Europe, the discipline is often referred to as general practice and a practitioner as a general practice doctor or GP; this name emphasises the holistic nature of this speciality, as well as its roots in the family. Family practice is a division of primary care that provides continuing and comprehensive health care for the individual and family across all ages, genders, diseases, and parts of the body; family physicians are often primary care physicians. It is based on knowledge of the patient in the context of the family and the community, emphasizing disease prevention and health promotion. According to the World Organization of Family Doctors (WONCA), the aim of family medicine is to provide personal, comprehensive, and continuing care for the individual in the context of the family and the community. The issues of values underlying this practice are usually known as primary care ethics.

Health care

Health care or healthcare is the maintenance or improvement of health via the prevention, diagnosis, and treatment of disease, illness, injury, and other physical and mental impairments in people. Health care is delivered by health professionals in allied health fields. Physicians and physician associates are a part of these health professionals. Dentistry, midwifery, nursing, medicine, optometry, audiology, pharmacy, psychology, occupational therapy, physical therapy and other health professions are all part of health care. It includes work done in providing primary care, secondary care, and tertiary care, as well as in public health.

Access to health care may vary across countries, communities, and individuals, largely influenced by social and economic conditions as well as health policies. Providing health care services means "the timely use of personal health services to achieve the best possible health outcomes". Factors to consider in terms of healthcare access include financial limitations (such as insurance coverage), geographic barriers (such as additional transportation costs, possibility to take paid time off of work to use such services), and personal limitations (lack of ability to communicate with healthcare providers, poor health literacy, low income). Limitations to health care services affects negatively the use of medical services, efficacy of treatments, and overall outcome (well-being, mortality rates).

Health care systems are organizations established to meet the health needs of targeted populations. According to the World Health Organization (WHO), a well-functioning health care system requires a financing mechanism, a well-trained and adequately paid workforce, reliable information on which to base decisions and policies, and well maintained health facilities to deliver quality medicines and technologies.An efficient health care system can contribute to a significant part of a country's economy, development and industrialization. Health care is conventionally regarded as an important determinant in promoting the general physical and mental health and well-being of people around the world. An example of this was the worldwide eradication of smallpox in 1980, declared by the WHO as the first disease in human history to be completely eliminated by deliberate health care interventions.

Helium

Helium (from Greek: ἥλιος, romanized: Helios, lit. 'Sun') is a chemical element with the symbol He and atomic number 2. It is a colorless, odorless, tasteless, non-toxic, inert, monatomic gas, the first in the noble gas group in the periodic table. Its boiling point is the lowest among all the elements. Helium is the second lightest and second most abundant element in the observable universe (hydrogen is the lightest and most abundant) being present at about 24% of the total elemental mass, which is more than 12 times the mass of all the heavier elements combined. Its abundance is similar to this in both the Sun and in Jupiter. This is due to the very high nuclear binding energy (per nucleon) of helium-4, with respect to the next three elements after helium. This helium-4 binding energy also accounts for why it is a product of both nuclear fusion and radioactive decay. Most helium in the universe is helium-4, the vast majority of which was formed during the Big Bang. Large amounts of new helium are being created by nuclear fusion of hydrogen in stars.

Helium, is named for the Greek Titan of the Sun, Helios. It was first detected as an unknown, yellow spectral line signature in sunlight, during a solar eclipse in 1868, by Georges Rayet, Captain C. T. Haig, Norman R. Pogson, and Lieutenant John Herschel, and was subsequently confirmed by French astronomer, Jules Janssen. Janssen is often jointly credited with detecting the element, along with Norman Lockyer. Janssen recorded the helium spectral line during the solar eclipse of 1868, while Lockyer observed it from Britain. Lockyer was the first to propose that the line was due to a new element, which, he named. The formal discovery of the element was made in 1895 by two Swedish chemists, Per Teodor Cleve and Nils Abraham Langlet, who found helium emanating from the uranium ore, cleveite. In 1903, large reserves of helium were found in natural gas fields in parts of the United States, which is, by far, the largest supplier of the gas today.

Liquid helium is used in cryogenics (its largest single use, absorbing about a quarter of production), particularly in the cooling of superconducting magnets, with the main commercial application being in MRI scanners. Helium's other industrial uses—as a pressurizing and purge gas, as a protective atmosphere for arc welding and in processes such as growing crystals to make silicon wafers—account for half of the gas produced. A well-known but minor use is as a lifting gas in balloons and airships. As with any gas whose density differs from that of air, inhaling a small volume of helium temporarily changes the timbre and quality of the human voice. In scientific research, the behavior of the two fluid phases of helium-4 (helium I and helium II) is important to researchers studying quantum mechanics (in particular the property of superfluidity) and to those looking at the phenomena, such as superconductivity, produced in matter near absolute zero.

On Earth it is relatively rare—5.2 ppm by volume in the atmosphere. Most terrestrial helium present today is created by the natural radioactive decay of heavy radioactive elements (thorium and uranium, although there are other examples), as the alpha particles emitted by such decays consist of helium-4 nuclei. This radiogenic helium is trapped with natural gas in concentrations as great as 7% by volume, from which it is extracted commercially by a low-temperature separation process called fractional distillation. Previously, terrestrial helium—a non-renewable resource, because, once released into the atmosphere it readily escapes into space—was thought to be in increasingly short supply. However, recent studies suggest that helium produced deep in the earth by radioactive decay can collect in natural gas reserves in larger than expected quantities, in some cases, having been released by volcanic activity.

Hypoxia (medical)

Hypoxia is a condition in which the body or a region of the body is deprived of adequate oxygen supply at the tissue level. Hypoxia may be classified as either generalized, affecting the whole body, or local, affecting a region of the body. Although hypoxia is often a pathological condition, variations in arterial oxygen concentrations can be part of the normal physiology, for example, during hypoventilation training or strenuous physical exercise.

Hypoxia differs from hypoxemia and anoxemia in that hypoxia refers to a state in which oxygen supply is insufficient, whereas hypoxemia and anoxemia refer specifically to states that have low or zero arterial oxygen supply. Hypoxia in which there is complete deprivation of oxygen supply is referred to as anoxia.

Generalized hypoxia occurs in healthy people when they ascend to high altitude, where it causes altitude sickness leading to potentially fatal complications: high altitude pulmonary edema (HAPE) and high altitude cerebral edema (HACE). Hypoxia also occurs in healthy individuals when breathing mixtures of gases with a low oxygen content, e.g. while diving underwater especially when using closed-circuit rebreather systems that control the amount of oxygen in the supplied air. Mild, non-damaging intermittent hypoxia is used intentionally during altitude training to develop an athletic performance adaptation at both the systemic and cellular level.Hypoxia is a common complication of preterm birth in newborn infants. Because the lungs develop late in pregnancy, premature infants frequently possess underdeveloped lungs. To improve lung function, doctors frequently place infants at risk of hypoxia inside incubators (also known as humidicribs) that provide continuous positive airway pressure.

IPv4 address exhaustion

IPv4 address exhaustion is the depletion of the pool of unallocated IPv4 addresses. Because there are fewer than 4.3 billion addresses available, depletion has been anticipated since the late 1980s, when the Internet started to experience dramatic growth. This depletion is one of the reasons for the development and deployment of its successor protocol, IPv6. Currently IPv4 and IPv6 coexist in the Internet.

The IP address space is managed globally by the Internet Assigned Numbers Authority (IANA), and by five regional Internet registries (RIR) responsible in their designated territories for assignment to end users and local Internet registries, such as Internet service providers. The main market forces that accelerated IPv4 address depletion included the rapidly growing number of Internet users, always-on devices, and mobile devices.

The Internet Engineering Task Force (IETF) created the Routing and Addressing Group (ROAD) in November 1991 to respond to the scalability problem caused by the classful network allocation system in place at the time. The anticipated shortage has been the driving factor in creating and adopting several new technologies, including network address translation (NAT), Classless Inter-Domain Routing (CIDR) in 1993, and IPv6 in 1998. IPv6, the successor technology to IPv4 which was designed to address this problem, supports approximately 3.4×1038 network addresses. Although as of 2008 the predicted depletion was already approaching its final stages, most providers of Internet services and software vendors were just beginning IPv6 deployment at that time.The top-level exhaustion occurred on 31 January 2011. Four of the five RIRs have exhausted allocation of all the blocks they have not reserved for IPv6 transition; this occurred on 15 April 2011 for the Asia-Pacific (APNIC), on 14 September 2012 for Europe, Middle East and Central Asia (RIPE NCC), on 10 June 2014 for Latin America and the Caribbean (LACNIC), and on 24 September 2015 for North America (ARIN). Individual ISPs still had unassigned pools of IP addresses, and could recycle addresses no longer needed by their subscribers. Each exhausted its pool of available addresses at different times.

Nursing

Nursing is a profession within the health care sector focused on the care of individuals, families, and communities so they may attain, maintain, or recover optimal health and quality of life. Nurses may be differentiated from other health care providers by their approach to patient care, training, and scope of practice. Nurses practice in many specialties with differing levels of prescription authority. Many nurses provide care within the ordering scope of physicians, and this traditional role has shaped the public image of nurses as care providers. However, nurse practitioners are permitted by most jurisdictions to practice independently in a variety of settings. Since the postwar period, nurse education has undergone a process of diversification towards advanced and specialized credentials, and many of the traditional regulations and provider roles are changing.Nurses develop a plan of care, working collaboratively with physicians, therapists, the patient, the patient's family and other team members, that focuses on treating illness to improve quality of life. In the United States and the United Kingdom, advanced practice nurses, such as clinical nurse specialists and nurse practitioners, diagnose health problems and prescribe medications and other therapies, depending on individual state regulations. Nurses may help coordinate the patient care performed by other members of a multidisciplinary health care team such as therapists, medical practitioners and dietitians. Nurses provide care both interdependently, for example, with physicians, and independently as nursing professionals.

Rationing

Rationing is the controlled distribution of scarce resources, goods, services, or an artificial restriction of demand. Rationing controls the size of the ration, which is one's allowed portion of the resources being distributed on a particular day or at a particular time. There are many forms of rationing, and in western civilization people experience some of them in daily life without realizing it.Rationing is often done to keep price below the equilibrium (market-clearing) price determined by the process of supply and demand in an unfettered market. Thus, rationing can be complementary to price controls. An example of rationing in the face of rising prices took place in the various countries where there was rationing of gasoline during the 1973 energy crisis.

A reason for setting the price lower than would clear the market may be that there is a shortage, which would drive the market price very high. High prices, especially in the case of necessities, are undesirable with regard to those who cannot afford them. Traditionalist economists argue, however, that high prices act to reduce waste of the scarce resource while also providing incentive to produce more.

Rationing using ration stamps is only one kind of non-price rationing. For example, scarce products can be rationed using queues. This is seen, for example, at amusement parks, where one pays a price to get in and then need not pay any price to go on the rides. Similarly, in the absence of road pricing, access to roads is rationed in a first come, first served queueing process, leading to congestion.

Authorities which introduce rationing often have to deal with the rationed goods being sold illegally on the black market.

Shortage economy

Shortage economy (Polish: gospodarka niedoboru, Hungarian: hiánygazdaság) is a term coined by Hungarian economist János Kornai, who used this term to criticize the old centrally-planned economies of the communist states of the Eastern Bloc.

In his article Economics of Shortage (1980), Kornai argued that the chronic shortages seen throughout Central and Eastern Europe in the late 1970s (and which continued during the 1980s) were not the consequences of planners' errors, but rather systemic flaws. A shortage of a certain item does not necessarily mean that the item is not being produced; rather, it means that the amount of the good demanded exceeds the amount supplied at a given price (see supply and demand). This may be caused by a government-enforced low price which encourages consumers to demand a higher amount than is supplied. However, Kornai concentrated on the role of reduced supply and argued that this was the underlying cause of Eastern European shortages during the 1980s.

Water scarcity

Water scarcity is the lack of fresh water resources to meet water demand. It affects every continent and was listed in 2019 by the World Economic Forum as one of the largest global risks in terms of potential impact over the next decade. It is manifested by partial or no satisfaction of expressed demand, economic competition for water quantity or quality, disputes between users, irreversible depletion of groundwater, and negative impacts on the environment. One-third of the global population (2 billion people) live under conditions of severe water scarcity at least 1 month of the year. Half a billion people in the world face severe water scarcity all year round. Half of the world’s largest cities experience water scarcity.A mere 0.014% of all water on Earth is both fresh and easily accessible. Of the remaining water, 97% is saline and a little less than 3% is hard to access. Technically, there is a sufficient amount of freshwater on a global scale. However, due to unequal distribution (exacerbated by climate change) resulting in some very wet and some very dry geographic locations, plus a sharp rise in global freshwater demand in recent decades driven by industry, humanity is facing a water crisis. Demand is expected to outstrip supply by 40% in 2030, if current trends continue.The essence of global water scarcity is the geographic and temporal mismatch between freshwater demand and availability. The increasing world population, improving living standards, changing consumption patterns, and expansion of irrigated agriculture are the main driving forces for the rising global demand for water. Climate change, such as altered weather-patterns (including droughts or floods), deforestation, increased pollution, green house gases, and wasteful use of water can cause insufficient supply. At the global level and on an annual basis, enough freshwater is available to meet such demand, but spatial and temporal variations of water demand and availability are large, leading to (physical) water scarcity in several parts of the world during specific times of the year. All causes of water scarcity are related to human interference with the water cycle. Scarcity varies over time as a result of natural hydrological variability, but varies even more so as a function of prevailing economic policy, planning and management approaches. Scarcity can be expected to intensify with most forms of economic development, but, if correctly identified, many of its causes can be predicted, avoided or mitigated.Some countries have already proven that decoupling water use from economic growth is possible. For example, in Australia, water consumption declined by 40% between 2001 and 2009 while the economy grew by more than 30%. The International Resource Panel of the UN states that governments have tended to invest heavily in largely inefficient solutions: mega-projects like dams, canals, aqueducts, pipelines and water reservoirs, which are generally neither environmentally sustainable nor economically viable. The most cost-effective way of decoupling water use from economic growth, according to the scientific panel, is for governments to create holistic water management plans that take into account the entire water cycle: from source to distribution, economic use, treatment, recycling, reuse and return to the environment.

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