Question

What do economists mean by scarcity? Why is the concept so important in economic analysis?

Answer 1

Scarcity is the fundamental economic problem according to economists. It means that there are insufficient productive resources to meet all human wants and needs that are unlimited. (Problem due to limited resources and unlimited wants).

This concept is the most important one in economic analysis. All economic theories that exist are made keeping scarcity in mind. Human make choices everyday to satisfy themselves as much as possible with the resources they have. That's what economics is all about. It's about allocation of these scarce resources to gain maximum results.