ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Scarcity arises when there’s a mismatch between the supply and demand of a commodity; the demand surges, and the supply doesn’t keep up. As a result, the commodity’s price rises, which is termed scarcity pricing.

Detailed explanation-2: -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-3: -Key Takeaways. The scarcity principle is an economic theory that explains the price relationship between dynamic supply and demand. According to the scarcity principle, the price of a good, which has low supply and high demand, rises to meet the expected demand.

Detailed explanation-4: -The law of supply and demand states that when the demand for a good or service is higher than the supply, prices are likely to rise. In these circumstances, suppliers tend to produce more to satisfy the demand and take advantage of the margin opportunities.

Detailed explanation-5: -What is the Scarcity Effect? The Scarcity Effect is the cognitive bias that makes people place a higher value on an object that is scarce and a lower value on one that is available in abundance.