What is Scarcity Principle?
Definition of Scarcity Principle
When requirement and demand is more than available resources it leads to mismatch between the desired supply and demand equilibrium, this as a result in economic principle. This scarcity principle suggests that the price of scarce product must rise till equilibrium is achieved between supply and demand.
Explanation of Scarcity Principle
When a product is in high demand and low supply, consumers try to conduct their cost benefit analysis. The consumer knows that the product is more likely to be expensive but at the same time he/she is aware of the benefit it can give to him/her.