Definition of Scarcity principle:
The scarcity principle is related to pricing theory. According to the scarcity principle, the price for a scarce good should rise until an equilibrium is reached between supply and demand. However, this would result in the restricted exclusion of the good only to those who can afford it. And if the resource that is scarce happens to be grain, for instance, individuals will not be able to attain their basic needs.
An economic theory which states that limited supply, combined with high demand, equals a lack of pricing equilibrium. Typically, demand and supply will gravitate prices to a stable balance; however, scarcity of a good or service changes the way buyers will value the purchase, thus leading to new market conditions.
The scarcity principle is an economic theory in which a limited supply of a good—coupled with a high demand for that good—results in a mismatch between the desired supply and demand equilibrium.
How to use Scarcity principle in a sentence?
- According to the scarcity principle, the price of a good, which has low supply and high demand, rises to meet the expected demand.
- Marketers often use the principle to create artificial scarcity for a given product or good—and make it exclusive—in order to generate demand for it.
- The scarcity principle is an economic theory that explains the price relationship between dynamic supply and demand.
Meaning of Scarcity principle & Scarcity principle Definition