Which statement accurately summarizes the relationship between the prices of goods and their relative scarcity?
A)The price of a good is a direct function of the relative scarcity of the good.
B)The price of a good is an inverse function of the relative scarcity of the good.
C)The price of a good is independent of the relative scarcity of the good.
D)High prices lead to greater relative scarcity.

Question

Quizplus · Accepted Answer

The law of supply and demand states that the price of a good is determined by the interaction between the quantity of the good produced and the quantity consumers want to buy. The relative scarcity of a good affects the quantity consumers want to buy, so as the relative scarcity of a good increases, the quantity consumers want to buy will decrease, and the price of the good will increase. Therefore, the price of a good is a direct function of the relative scarcity of the good.

Which Statement Accurately Summarizes the Relationship Between the Prices of Goods