Scarcity refers to the limited availability of resources compared to the unlimited wants and needs of people. For example, there are only so many natural resources like water and oil, but many people need them for drinking, cooking, and transportation. This imbalance creates a situation where not everyone can have as much of these resources as they desire. Because of scarcity, choices must be made about how to allocate resources effectively. Individuals, businesses, and governments often face tough decisions about spending and investing. For instance, a government may need to decide whether to spend money on education or infrastructure, knowing that it cannot fund both fully due to limited resources.