It means that the demand for a good or service is greater than the availability of the good or service. Therefore, scarcity can limit the choices available to the consumers who ultimately make up the economy. Scarcity is important for understanding how goods and services are valued.

Why do we need scarcity?

We run into scarcity because while resources are limited, we are a society with unlimited wants. ... We have to efficiently allocate resources. We have to do those things because resources are limited and cannot meet our own unlimited demands. Without scarcity, the science of economics would not exist.

Why is scarcity important in decisions?

The ability to make decisions comes with a limited capacity. The scarcity state depletes this finite capacity of decision-making. ... The scarcity of money affects the decision to spend that money on the urgent needs while ignoring the other important things which comes with a burden of future cost.