Final answer:
Scarcity refers to the situation where unlimited human wants exceed the limited supply of resources, which necessitates resource allocation. It is a fundamental economic problem.
Step-by-step explanation:
Scarcity in economics refers to the concept that human wants for goods and services exceed the available supply. This results from the fact that while our demands are virtually unlimited, our resources are limited. We can only produce so much with the available land, factories, oil, and human resources
Scarcity leads to the need for resource allocation, which involves making decisions about how best to distribute resources for the maximum benefit of society. Because resources cannot fulfill all wants and needs, scarcity is a fundamental economic problem that drives the allocation of resources and the principles of supply and demand.