1. Disasters increase scarcity and reduce the output of economies.
In simplest terms, inputs are necessary for outputs; fewer inputs means fewer outputs. When a disaster damages or destroys resources – whether labor, capital, or natural resources – total production in the economy must fall.
The production possibilities frontier (PPF) is used by economists to model “production possibilities” – the output possible in an economy making full use of its available resources. The PPF shrinks when disasters reduce the availability of the resources used to make goods and services.
