ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Scarcity refers to a limited supply of goods. That scarcity can then lead to high demand from consumers. According to the scarcity principle, the price of an item in low supply and high demand will steadily rise to meet the consumers’ expected demand.

Detailed explanation-2: -When raw materials become scarce, their prices increase, leading to higher supply costs. For example, T-shirts are always “scarce” products because their demand is limitless, while their supply may fall short.

Detailed explanation-3: -Scarcity is important for understanding how goods and services are valued. Things that are scarce, like gold, diamonds, or certain kinds of knowledge, are more valuable for being scarce because sellers of these goods and services can set higher prices.

Detailed explanation-4: -It can also refer to how companies decide what and how to produce using limited resources and how they determine a retail price for the item based on purchase demand. Scarcity occurs when the demand for a natural resource, product or service exceeds the supply.

Detailed explanation-5: -Scarcity affects methods of production by contributing important information for which methods will be utilized. It can also result in innovations. For example, when machinery is scarce, people may instead revert to more basic methods of production.