In economic theory, scarcity is a phenomenon where there are limited resources but unlimited wants. The scarcity has a very important role to play in the economy, as it creates one of the most difficult problem. The theory that depends on the scarcity problems are demand and supply, resource allocation and efficient utilization of resources and inputs. Scarcity helps to determine the price of a product. More scarce a product is higher is its price, whereas less scarcity in amount makes a product cheaper. Scarcity also helps make decision on distribution of a product because scarce product or resource becomes limited and then proper distribution is required in order to achieve equality in the society. For example, suppose there are two goods poultry egg and ostrich egg that attracts zero cost for producing, however, getting ostrich egg is much more difficult than getting poultry egg because ostrich is a much rare bird in comparison with poultry. Thus, ostrich egg requires more time and other resources to bring them in the market and therefore concept of scarcity is significant to the economy.
Rivalry is the economic phenomenon in which two or more companies catering the same market engage in competition. In rivalry, companies engage in price war in order to gain more customers for their product. It increases the revenue of one company at the cost of the other. However, rivalries make the competition more intense and due to this, consumers will be able to buy the good at a lower price. Therefore, rivalry increases the surplus of the consumer. Rivalry makes a company to reallocate its input to manufacture its product more efficiently and reduces production cost. Hence, rivalry is necessary for an economy to improve and thrive in a desirable weight.
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