What do scarcity and choice mean in economics?
Scarcity is the condition in which human beings have unlimited wants even as they have only limited resources with which to fulfill those wants. This is true of even the richest person in the world. Even the richest person in the world cannot own everything in the world. Moreover, even the richest person in the world can only use a particular resource in a particular way. For example, imagine that Bill Gates has $10 million that he wants to invest. Once he invests that $10 million, he cannot use it in any other way. He has given up the chance to use that particular $10 million to buy a yacht or to use in some different investment.
Because of this, everyone in the world has to make choices. I might have to choose whether to go on vacation or to put money towards my kids’ college education. A very rich person might have to choose between buying a new luxury car and investing more money in the stock market. Either way, choices are being made. People have unlimited things that they want to do but they do not have unlimited resources. This means that scarcity exists. Scarcity forces people to make choices. Economics studies the choices that people make in response to scarcity.