Which of the following best describes the concept of scarcity in economics?

• A. Scarcity occurs only when prices of goods and services increase.
• B. Scarcity is the result of government intervention in markets.
• C. Scarcity means that resources are distributed equally among all individuals.
• D. Scarcity refers to the limited nature of society's resources, given unlimited wants and needs.

Answer: (D)

Verified step by step guidance

1. Understand that scarcity is a fundamental concept in economics that arises because resources (such as time, money, labor, and raw materials) are limited, while human wants and needs are virtually unlimited.
2. Recognize that scarcity is not dependent on price changes; prices may fluctuate due to scarcity but scarcity itself exists independently of price movements.
3. Note that scarcity is not caused solely by government intervention; it is a natural condition of resource limitation in any economy.
4. Acknowledge that scarcity does not imply equal distribution of resources; rather, it highlights the need to make choices about how to allocate limited resources efficiently.
5. Summarize that scarcity means society must prioritize and make decisions about resource allocation because there are not enough resources to satisfy all wants and needs simultaneously.