How is scarcity related to competition?
Competition is an effect of scarcity.
Scarcity is an effect of competition.
Both scarcity and competition are effects of a rationing device.
Both scarcity and competition are effects of opportunity cost.
Scarcity produces disutility and competition produces utility.
The correct answer and explanation is :
The correct answer is:
Competition is an effect of scarcity.
Explanation:
Scarcity refers to the fundamental economic problem where limited resources are available to satisfy an infinite number of wants and needs. Since resources such as land, labor, and capital are limited, but human desires are practically unlimited, there arises a situation where individuals, firms, and nations must make choices about how to allocate these scarce resources.
Competition arises as a direct result of scarcity. Because resources are limited, individuals and businesses must compete with one another to obtain and utilize them. Whether it’s land, labor, or capital, the scarcity of these resources forces people to make decisions about how to use them most efficiently. For example, in the job market, employees compete for positions because the number of available jobs is limited compared to the number of job seekers. Similarly, businesses compete for a share of the market because there is a limited number of consumers willing to spend money on goods and services.
Scarcity leads to competition because, in the absence of unlimited resources, there is a need to prioritize the allocation of those resources. As a result, those who are better able to compete for resources (through higher offers, better quality, or more efficient use of resources) are more likely to succeed.
In economic theory, competition drives innovation, efficiency, and better outcomes in the market, but it is inherently tied to scarcity. In a world of abundance, where resources are not limited, competition would be much less pronounced or perhaps nonexistent.
In contrast, scarcity, as a fundamental concept, does not arise from competition; it is the root cause of it. Therefore, competition is a result of scarcity, not the other way around.