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beateauthorWhat Is Relative Scarcity and Absolute Scarcity?
Scarcity is a concept that is used in economics to describe the limited availability of resources. It is important to understand the differences between relative scarcity and absolute scarcity in order to appreciate how resources are allocated in a market economy. This article will discuss the differences between these two concepts and their implications for resource allocation in the economy.
Relative Scarcity
Relative scarcity refers to the concept of comparing the price of a good or service with respect to other goods and services in the market. When the price of a good or service is high relative to other goods and services, it is considered to be scarce in relation to those other goods and services. This means that there is a limited supply of the good or service in the market, and as a result, demand for it is high.
In a market economy, the price of a good or service is determined by the interaction of supply and demand. When the price of a good or service is high relative to other goods and services, it is because there is a low supply of the good or service in the market, and as a result, demand for it is high. This high demand can be due to factors such as the good or service being in high demand, having a unique quality or feature, or being in a short supply region.
Absolute Scarcity
Absolute scarcity refers to the concept of comparing the availability of a good or service with respect to the total available resources in the economy. When the price of a good or service is high relative to other goods and services, it is considered to be scarce in relation to other available resources in the economy. This means that there is a limited supply of the good or service in the economy, and as a result, demand for it is high.
In a market economy, the price of a good or service is determined by the interaction of supply and demand. When the price of a good or service is high relative to other goods and services, it is because there is a low supply of the good or service in the economy, and as a result, demand for it is high. This high demand can be due to factors such as the good or service being in high demand, having a unique quality or feature, or being in a short supply region.
Relative scarcity and absolute scarcity are two ways of measuring the scarcity of resources in the economy. Understanding the differences between these concepts is crucial for understanding how resources are allocated in a market economy. In a market economy, the price of a good or service is determined by the interaction of supply and demand. When the price of a good or service is high relative to other goods and services, it is because there is a limited supply of the good or service in the market, or in the economy, and as a result, demand for it is high. This high demand can be due to factors such as the good or service being in high demand, having a unique quality or feature, or being in a short supply region.