What does 'scarcity' refer to?

Scarcity refers to the concept of having a limited supply of a resource in relation to the demand for that resource. In this context, when the answer identifies 'a small and inadequate amount,' it accurately captures the essence of scarcity. This term is commonly used in economics to explain situations where resources are insufficient to meet the needs or wants of individuals or society as a whole.

For example, if there is a scarcity of water in a region, it means that there is not enough water available for all the people who need it, leading to competition for this limited resource. Understanding scarcity is essential because it underscores the need for prioritizing resource allocation and making economic decisions.