Which of the following describes how a market will respond when the scarcity of a good increases?

Question

BlackTom AI · Accepted Answer

First, let's restate the scenario and each option to ensure clarity about what is being evaluated.
Question: Which of the following describes how a market will respond when the scarcity of a good increases?
Options:
- Consumers will increase their demand for the good
- Consumers will decrease their demand for the good
- producers will increase the supply of the good
- the price of the good will increase
- the price of the good will decrease

Now, evaluate each option one by one:
Option 1: Consumers will increase their demand for the good. This would imply that scarcity leads to more demand. However, scarcity means the good is harder to obtain, which typically reduces demand if buyers cannot access it, and in standard demand–supply analysis, higher scarcity tends to raise price and may shift the quantity demanded along the demand curve downward, not increase overall demand. Therefore, this option misstates the typical demand response to scarcity.
Option 2: Consumers will decrease their demand for the good. While scarcity can reduce the quantity demanded at existing prices as buyers face higher costs, the core market response to a shift in scarcity is usually through price adjustments and quantity supplied, not an automatic wholesale decrease in demand. This option ignores the price mechanism and is therefore not the primary description of the market reaction to increased scarcity.
Option 3: Producers will increase the supply of the good. In the face of increased scarcity, prices tend to rise, which can incentivize producers to expand supply over time. However, this is not an immediate or guaranteed response and depends on factors like capacity, costs, and access to inputs. It describes a possible reaction rather than the fundamental immediate description of scarcity's effect. Additionally, the prompt asks for how the market will respond, which is most directly captured by price movement rather than an action by producers that may or may not occur promptly.
Option 4: The price of the good will increase. Scarcity means the good is in shorter supply relative to demand. In a standard market model, this scarcity pushes the equilibrium price up as buyers compete for limited availability. This option directly captures the core and most consistent market response to increased scarcity.
Option 5: The price of the good will decrease. This contradicts the basic effect of scarcity. Less availability, all else equal, tends to raise price rather than lower it, so this option misstates the price response.

In summary, among the given statements, the one that best describes the immediate and central market response to increased scarcity is that the price will rise. The other options either describe demand changes that are not the primary consequence of scarcity, describe less direct responses (like producers adjusting supply) that depend on other conditions, or contradict the fundamental price mechanism at work when scarcity grows.

AP Economics-Hillebrand AP Microeconomics Sem 1 Exam 2025 - Requires Respondus LockDown Browser

Which of the following describes how a market will respond when the scarcity of a good increases?

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AP Economics-Hillebrand AP Microeconomics Sem 1 Exam 2025 - Requires Respondus LockDown Browser

Which of the following describes how a market will respond when the scarcity of a good increases?

View Explanation

Log in for full answers

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