Question

Is the following statement true or false? Briefly explain. (Note: no explanation, no

credits.)

a) If something is scarce, it must be rare; if something is rare, it must be scarce.

b) Anything with a positive market price must be a scarce good; any scarce

goods must have a positive market price.

c) When you buy something, that must mean it is more costly for you to

produce it yourself.

Answer 1

a. False

Scarcity is loosely related to demand side while rarity is related to supply side. Scare is often referred to the degree of demand, that is, the available resource is insufficient to meet needs. Rare is something which is not commonly found. Thus if something is scarce it may not necessarily be rare and vice versa.

b. True

A good which is not scarce even at zero market price is a free good. Since in scarce goods the quantity demanded exceeds quantity suppied, they have a positive market price.

c. True

When we buy something rather than producing it ourselves, it implies that our opportunity cost of producing it is greater than its price. Hence it is rational to pay a lower price and buy it.