Individuals have unlimited wants and needs. But the resources available to satisfy those wants are limited. This forces individuals to make choices. Every want and need cannot be satisfied.
The condition in which individual economic agents are forced to make choices among available alternatives is called scarcity. Resources normally required for production are land, labour, and capital. Scarcity refers to limited availability of resources that are required for production, i.e., scarce goods, scarce land, scarce labour, and scarce capital.
Scare goods are those goods which are available in the market at a very limited amount, i.e., those goods whose demand exceeds supply. Example: Non-renewable resources like oil, natural gas, and minerals.
Scarcity may also refer to an individual’s capacity to buy all or some of the commodity available in market with his or her resources. For example, it is extremely hard for an individual earning an annual income of ₹500,000 to afford a Ferrari. We live in a world of scarcity.