Scarcity in real estate is defined as which of the following?

• A. Is dependent on human demand & the use of land
• B. The economic characteristics that influence the value of land
• C. The fixed supply of land
• D. The legal restrictions on land use

Answer: (A)

Scarcity in real estate comes from the reality that land is a finite resource and its value rises when there is demand for its location and potential uses. The best way to describe scarcity is that it is driven by human demand and how land can be used; when desirable parcels are scarce, competition increases and prices rise. While the fixed supply of land helps create scarcity, simply saying the supply is fixed doesn’t explain why scarcity occurs or how demand changes its impact. Legal restrictions can limit how land is used and thus influence scarcity, but they don’t define it by themselves. So the emphasis is on the relationship between what people want to do with land and the limited amount of land available.