Scarcity and prices

Abstract

A complete set of definitions of scarcity and some theorems on the relationship between competitive prices and scarcity of commodities are introduced. Competitive prices do not always represent signals of scarcity. Anyway under the hypothesis of monotonic preferences scarce commodities have positive prices, and when all commodities are both normal and gross substitutes, prices are indices of relative scarcity. Consequently, the connection between scarcity and prices is not an absolute foundation of economic theory.