In economics, what does scarcity refer to?

Scarcity refers to the fundamental economic problem of having seemingly unlimited human wants in a world of limited resources. When we say resources are limited, we mean that there are not enough resources available to satisfy every want and need of society. This discrepancy creates competition for those resources, leading to trade-offs in decision-making about how to allocate them effectively.

The correct choice highlights this core concept that while human desires are infinite, the resources—such as land, labor, and capital—are finite. This scarcity forces individuals and societies to make choices about production, distribution, and consumption. In contrast, other options incorrectly represent the nature of resources; for example, claiming resources are unlimited or abundant contradicts the essence of scarcity and overlooks the necessity of prioritization in economic activity.