Physical water scarcity occurs when there is not enough water to meet all demands. Economic water scarcity is caused by a lack of investment in water or a lack of human capacity to satisfy the demand for water, even in places where water is abundant.

Water scarcity can be a result of two mechanisms: physical (absolute) water scarcity and economic water scarcity, where physical water scarcity is a result of inadequate natural water resources to supply a region’s demand, and economic water scarcity is a result of poor management of the sufficient available water …

There are two key types of water scarcity: physical and economic. Physical scarcity occurs when the demand of the population exceeds the available water resources of a region. Projections based on intermediate population growth rate.

Following are some of the major causes of water shortage:

• Climate change.
• Natural calamities such as droughts and floods.
• Increased human consumption.
• Overuse and wastage of water.
• A global rise in freshwater demand.
• Overuse of aquifers and its consequent slow recharge.

Scarcity refers to a basic economic problem—the gap between limited resources and theoretically limitless wants. Any resource that has a non-zero cost to consume is scarce to some degree, but what matters in practice is relative scarcity. Scarcity is also referred to as “paucity.”

In economic terms, money is not a factor of production because it is a resource used to acquire resources that go into producing goods. The factors of production are capital, labor, and land. However, it is not a factor of production. Money is used to purchase or pay for (in the case of labor) factors of production.