The pandemic has been marked by international shortages and market panics that we typically associate with natural disasters. Across the globe, stores were running out of essentials like toilet paper, canned goods, boxed items, and other non-perishable items. Masks, hand sanitizers, and home cleaners began to cost two to three times more than their usual price. People had their hours cut, were furloughed, or were let go, and even as paychecks shrank the price of rent, food, utilities, and home supplies continued to rise.
The economic panic that was spiked by the coronavirus pandemic is a common pattern in times of economic depression. High rates of unemployment, lowered export and import rates, rising inflation, and falling supply and demand curves all destabilize the economy very quickly, leaving millions of people struggling to put food on the table. Combine that with a medical disaster, and things get out of control fast. The economic availability of certain essential products and services has long been a basic economic problem that continues to shape the flow of goods and services inside market economies. This same concept underpins the essential economic theory of supply and demand and is another foundational building block of economic theory: scarcity.
What is scarcity?
Scarcity refers to a sort of permanent word problem that many economists face. It goes something like this: there are only so many resources available in order to meet market demand for a particular good or service. There will never be enough resources to meet the demand of every person who wants it. Therefore, you will have to decide how to most efficiently distribute that resource in order to meet as many people’s demands as possible. The process of making those allocation decisions is understood as scarcity.
Let’s look at this in a practical sense. Consider this example:
Your child and their friend are riding their bikes home from school one day when they get into a crash. They are all injured to some degree and come to you for help. You notice that your child has two cuts that are seriously bleeding and the other child has two scrapes that are bleeding, but not as badly as your child’s. You only have two bandages. How do you decide which child gets the band-aid?
The principle of scarcity would say that the bandages should go to the child that needs them the most. Your child’s cuts are bleeding the most, so they should get both bandages. Even though the other child also has a clear need for band-aids, because you don’t have enough resources available to you, you have to make a tough decision that results in not everyone who needed a band-aid getting one.
What resources were affected by scarcity during the pandemic?
Despite many warnings from health care professionals, many hospitals or health systems did not have nearly enough stockpiles of essential medical equipment. Hospitals were short on ventilators, protective equipment, intensive care beds, and extra staff. Many hospitals also quickly ran out of even stockpiled supplies such as hand sanitizers or disposable items. When demand spiked, there were not enough resources available. Hospitals began having to make decisions about which patients had the best survival outcomes, who would benefit the most from the limited resources they had available.
Scarcity also struck in unexpected sectors of commercial retail products. Toilet paper ran out quickly and inexplicably. The same became true for canned goods, distilled water, hand sanitizers, and commercial cleaning products. Retail consumers were struggling because hospitals had begun dipping into the retail supply of products, not only upsetting the scarcity chain but also disrupting supply and demand cycles. In order to protect product inventory, stores had to put limits in place in order to prevent others from stockpiling or hoarding certain supplies.
How Do I Budget Resources During the Pandemic?
Budgeting your resources during the pandemic looks different for every individual and household. Your risk level and exposure to the coronavirus is a big factor: are you able to go out regularly and stock up on supplies, or do you need to limit your trips outside your home? Do you have the money to purchase inflated resources, or do you need to wait until prices have dropped before you can go shopping? As you make your own decisions about what you can and can’t afford during the pandemic, remember to keep the lesson of scarcity in mind: stick to spending limited resources only on the items that you need the most.
