In terms of partial-equilibrium supply and demand, the markets where prices are "cost-determined" have a supply curve that is very elastic or even horizontal, so that an increase in demand raises the quantity of production much more than the price. The price mostly reflects the scarcity of the inputs but not that of the product. On the other hand, those items with "scarcity value" have inelastic or even vertical supply curves, so that an increase in the demand for the product mostly increases the price and not the quantity supplied. The seller of the product receives a price higher than the cost of producing the item and so receives a significant scarcity rent or producer's surplus when demand is high. Note that the cost of production may be close to zero, as with a rare stamp, so that the entire price consists of scarcity rent.
In Bill's Big Idea: Save the Climate, Share the Wealth; Entrepreneur Inspires 'Cap-and-Dividend' Legislation With a Payoff for Taxpayers
Apr 08, 2009; For several years, Peter Barnes has been peddling a Big Idea about how to design climate change legislation so that it might...