Scarcity

There is never enough time, money, land, labour or materials to produce everything everyone wants. This is true for individuals, businesses and whole countries. Scarcity means every choice involves giving something up.

For an individual, scarcity might mean choosing between spending money on a holiday or saving it for a house. For a business, it might mean choosing between hiring more staff or buying new equipment. For a government, it might mean choosing between spending more on healthcare or on education.

Because of scarcity, every choice has an opportunity cost: the value of the next best alternative that is given up.

Scarcity is also why prices exist. When something is scarce relative to demand, its price tends to rise, which encourages people to use less of it and producers to supply more. Scarcity is not the same as poverty. Even very wealthy people and countries face scarcity, because their resources are still finite and they still have to choose.