In economics, scarcity refers to the situation of:
A) optimizing with the use of limited information.
B) having more wants than the number of available resources.
C) sellers setting the prices of their products too high for people to be able to afford them.
D) rationing of available goods and services by the government.
The correct answer and explanation is:
Correct Answer: B) having more wants than the number of available resources.
Explanation (300 Words):
In economics, scarcity is a fundamental concept that describes the gap between limited resources and unlimited human wants. The correct answer is B) having more wants than the number of available resources, because this definition captures the core idea that resources such as time, money, labor, raw materials, and capital are finite, while human desires and needs are virtually infinite.
Scarcity exists because every resource—land, labor, capital, and entrepreneurship—has alternative uses. For example, land used to grow wheat could alternatively be used for housing. Because we can’t fulfill all desires at the same time, individuals, businesses, and governments are forced to make choices. These choices result in opportunity costs, which represent the value of the next best alternative foregone.
Scarcity forces individuals and societies to prioritize and allocate their resources efficiently. This is where economic systems, such as capitalism or socialism, come into play to determine how scarce resources are distributed. Scarcity is also the driving reason behind the study of economics—it compels us to answer the fundamental economic questions: What to produce? How to produce? And for whom to produce?
The other choices in the question do not fully define scarcity:
- A) Optimizing with limited information refers more to bounded rationality or decision theory.
- C) Sellers setting prices too high may relate to market power or price gouging, not scarcity itself.
- D) Government rationing is a response to scarcity, not the definition of it.
In summary, scarcity is the condition of finite resources and infinite wants, and it underpins nearly every concept in economics—from supply and demand to market equilibrium and economic growth.