Which statement best describes the impact of scarcity?

Which statement best describes the impact of scarcity?

a. People are able to meet most of their needs.

b. Consumers must pay higher prices for many items.

c. Governments must try to meet the wants of citizens.

d. Economies can work to provide more goods and services.

Answer: b. Consumers must pay higher prices for many items.

Lack or scarcity, an economic concept, is the element where needs and wants are unlimited while resources are limited in availability. This pretty much says it all as it highlights to consumers that they have to pay more price for many an item. This is the case since scarcity plays a critical role in the provision as well as the demand in a market economy.

A resource or product that is available in smaller quantities than is needed in the market is said to be scarce or in short supply. This situation results in an increase in price within a competitive rivalry of ‘the other’ form. For instance, during or after a drought dry weather affects the supply of water and therefore demand aggregation leads to increased prices of agricultural products. Likewise, the same circumstance, when the reserves of oil are thought to be low, brings an increase in the gasoline price.

It is in various markets that we can trace this principle. The microeconomic characteristic of the housing market in a growing city with limited space for expansion is that it has fewer available homes to offer; hence, prices go up. This fact can be observed in the collectables market because an item with extremities of rarity is inevitably going to be expensive. In the present job market, specific employees with special and hard-to-find attributes can easily demand better remunerations.

Nevertheless, what is crucial to emphasize is that scarcity usually leads to higher prices, but it also stimulates the creation of new product versions and increases productivity. Such pressure may act as a positive driving force, encouraging economic entities to look for better solutions to produce certain goods or look for substitutes with the potential of inciting technological progression and improved organization of resources. However, the initial and perhaps the most apparent way through which scarcity touches the consumer is through having to part with more cash in exchange for scarce products.