What does 'scarcity' refer to in economics?

Scarcity in economics refers to the fundamental problem arising from limited resources in relation to unlimited wants. This concept recognizes that resources—such as time, money, and raw materials—are finite, while human desires and needs are virtually limitless. Therefore, scarcity forces individuals and societies to make choices about how to allocate their limited resources to meet their various needs and desires. This can involve trade-offs and prioritization, leading to important economic decisions at both the individual and societal levels. Understanding scarcity is essential for grasping the basic principles of economics, including supply and demand, resource allocation, and the necessity of making choices.