The principle of scarcity refers to the idea that there are limited resources available to fulfill unlimited wants and needs. This principle is fundamental in economics because it forces individuals and societies to make choices about how to allocate these scarce resources.
Related terms
Opportunity Cost: The value of the next best alternative forgone when making a choice.
Supply and Demand: The relationship between the availability of a product or service (supply) and how much people want it (demand).
Production Possibilities Curve: A graphical representation showing different combinations of two goods or services an economy can produce given its limited resources.