ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Societies can deal with scarcity by increasing supply. The more goods and services available to all, the less scarcity there will be. Of course, increasing supply comes with limitations, such as production capacity, land available for use, time, and so on. Another way to deal with scarcity is by reducing demand.

Detailed explanation-2: -Scarce goods and services are allocated in a market economy through the influence of prices on production and consumption decisions. Changes in supply or demand cause relative prices to change; in turn, buyers and sellers adjust their purchase and sales decisions.

Detailed explanation-3: -Whenever resources are particularly scarce, demand exceeds supply and prices are driven up. The effect of such a price rise is to discourage demand, conserve resources, and spread out their use over time. The greater the scarcity, the higher the price and the more the resource is rationed.

Detailed explanation-4: -rationing, government policy consisting of the planned and restrictive allocation of scarce resources and consumer goods, usually practiced during times of war, famine, or some other national emergency.

Detailed explanation-5: -The short-run rationing function rations the resources among the different consumers due to scarcity and excess demand. Prices are raised in order to reduce demand and ration resources. This is done more so since the supply cannot be adjusted in the short run.