The term used to refer to limited resources is “scarcity.” Scarcity describes a situation where the demand for a resource exceeds its availability, meaning that the resource is not sufficient to satisfy all the wants and needs of individuals or society as a whole.
This concept is fundamental in economics, as it explains why choices must be made regarding the allocation of resources. For example, when a particular resource, such as water, is not abundant enough to meet the needs of a community, decisions must be made about how to distribute it effectively among those who require it.
Scarcity can apply to natural resources like fossil fuels, land, and water, as well as man-made resources like time and money. Understanding scarcity is essential for individuals, businesses, and governments alike, as it influences budgeting, planning, and prioritizing needs and desires.