In economics, scarcity describes the basic problem that resources are limited but human wants are unlimited.
Land, labor, capital, time, and natural resources are finite, while people can always identify additional goods or services they would like to have. Because resources cannot satisfy every possible desire, individuals, businesses, and governments must make choices.
Every choice creates an opportunity cost: the value of the best alternative that is given up. Scarcity therefore makes economic decision-making necessary; it is not limited to rare or expensive goods. Even abundant resources can be scarce relative to demand.
Scarcity is often confused with temporary shortage. A shortage usually means that demand exceeds available supply at a particular price or time. Scarcity is broader and permanent: it exists because resources are insufficient to meet all wants, even when markets are functioning normally.