Scarcity raises both price and marginal utility but generally reduces total utility.

Question

Quizplus · Accepted Answer

Scarcity increases the value or price of a good or service because it is in high demand but limited supply. Additionally, scarcity can increase the marginal utility or satisfaction derived from consuming an additional unit of the good, as consumers may be willing to pay a higher price to obtain it. However, scarcity can also reduce total utility, as consumers may not be able to afford to consume as much of the good or may substitute other, less satisfying goods in its place.

Scarcity Raises Both Price and Marginal Utility but Generally Reduces