The initial modest price of lots in a new subdivision increasing as sales continue is an example of which principle?

The scenario described, where the initial modest price of lots in a new subdivision increases as sales continue, illustrates the principle of supply and demand. This principle states that as demand for a product increases, assuming supply remains relatively constant, prices tend to rise. In the context of a new subdivision, as prospective buyers recognize the value of the property and demand increases, the ability of sellers to raise prices is a natural outcome of this heightened demand.

In a new subdivision, initially, there may be an oversupply of lots at modest prices. However, as sales progress, the perception of scarcity increases, particularly if buyers are competing for the available lots. This competition drives prices up due to the increased demand for housing or land in that desirable location. Thus, the principle effectively captures the dynamic interaction between buyer interest and available inventory, leading to price adjustments in the market.