When economists speak of scarcity, they are referring to the
Group of answer choices
condition in which society is not employing all its resources in an efficient way.
condition in which people’s needs and wants outstrip the limited resources available to satisfy those needs and wants.
economic condition that exists in only very poor countries of the world.
condition in which society produces too much of a certain good creating a surplus.
The correct answer and explanation is :
The correct answer is:
Condition in which people’s needs and wants outstrip the limited resources available to satisfy those needs and wants.
Explanation (300+ words):
In economics, scarcity refers to the fundamental problem that arises because resources are limited while human wants are virtually infinite. This concept is the foundation of economic theory and applies universally — in rich and poor countries alike — because no society has enough resources to produce everything people desire.
Scarcity does not mean that a product is rare or hard to find; rather, it means that there is a limited supply of resources (such as land, labor, capital, and entrepreneurship) relative to the unlimited demands placed upon them. For example, there are only so many skilled workers, factories, and natural resources available, but people want more housing, healthcare, education, and technology than can be fully provided with those resources.
Because of scarcity, societies are forced to make choices about how to allocate resources. This leads to the concept of opportunity cost, which is what you give up when you choose one option over another. For instance, if a government spends money on building roads, it might have to reduce spending on healthcare or education. Every decision involves trade-offs because of limited resources.
It’s important to note that scarcity is a permanent condition, not something that can be eliminated with more money or better policies. Even wealthy countries like the United States face scarcity because they must decide how to distribute finite resources among competing needs.
The incorrect options misunderstand the concept. Scarcity is not about inefficiency, which refers to misusing resources; not limited to poor nations, as even the richest face scarcity; and not about surplus, which occurs when supply exceeds demand.
Therefore, economists define scarcity as the situation where people’s needs and wants outstrip the limited resources available to meet those needs and wants. This core concept drives economic decision-making and prioritization at all levels — individual, business, and government.