I want to explain what is scarcity with the exemple of water.
We all need water: we drink water, we use water to clean ourselves and clothes and house; water is also needed for the growth of everything in the fields; too much water and we lose the crop by flood; no water and the lost is due to drought. Finaly, we even use water to make electricity.
What is the value of water?
In Québec, we have nice rivers and if you have a ride in canoe by a nice summer day, you may take the water to drink directly with your hand from the river and it is pretty good and free.
In modern cities, we have tap water for which we pay montly a small amount of money; most of the cities use this clean water even to extinguish fires; we are rich! I remember in my family when we had water from a hand pump in the kitchen. It was in 1950! But it was free.
In many cities, now, water does not have a sufficient quality for human consomption; we use it for washing our body, clothes and house, but we cannot drink it; He have to buy the drinking water in bottle, small or large, and the prices vary from city to city.
Finally, just suppose that you are with Antoine de St-Exupéry in his plane when he crashed in the desert. After a few days without water, you design this small sheep as a box! Finally, you will have a lot of thanks to your savior who gives you some water.
So the value of water can be very small or very large. Sometimes, it is free; sometimes, it has a bigger value than diamond and gold.
The use value of water does not vary too much from city to city and from early days up to today. What will change is the exchange value of water. And this exchange value will increase when water is scare around you and it will decrease when you have plenty of it at your hand.
Scarcity explains the variation for the prices of water.
With the new ecological publicity and discussion, the price of water had increased in recent years. People are more aware of saving water. And the main enemy of water being pollution, people are beginning to put some value also on the pollution. This is the future...