The Theory of Scarcity

The Theory of Scarcity is an economic concept stating that resources—like land, labor, and raw materials—are limited, while human wants and needs are virtually unlimited. This imbalance forces individuals and societies to make choices about how to allocate these scarce resources efficiently. Because we cannot fulfill all desires simultaneously, prioritization and trade-offs are necessary, influencing prices and decision-making processes in markets. Essentially, scarcity is the fundamental reason economics exists: it explains why resources are valuable and why choices have to be made.