What does scarcity refer to in economic terms?

Scarcity in economic terms refers to the limited availability of resources relative to the unlimited wants and needs of individuals and society. This concept highlights that there are not enough resources—such as land, labor, and capital—to produce the goods and services that people desire. As a result, scarcity forces individuals, businesses, and governments to make choices about how to allocate these limited resources effectively.

In the context of the provided question, recognizing scarcity as limited resources available emphasizes the foundational economic principle that drives decision-making and prioritization within an economy. Understanding scarcity is essential for analyzing economic behavior, resource management, and the resulting implications for supply and demand in markets.