How is scarcity defined?

Scarcity is defined as a condition of being in short supply, which highlights the fundamental economic problem that arises because resources are limited while human wants are unlimited. This concept is crucial in understanding how societies allocate their finite resources to meet the competing needs and desires of individuals and businesses.

In economic terms, scarcity prompts the need for decision-making about resource allocation, as it leads to trade-offs and opportunity costs. When resources are scarce, choices must be made regarding their use, affecting everything from production to consumption patterns in an economy.

The other options presented do not correctly encapsulate the essence of scarcity; for instance, abundance of resources suggests that there is more than enough, which contradicts the principle of scarcity. A state of equilibrium refers to a balance between supply and demand rather than a shortage. An overproduction of goods implies that there is more than enough to meet demand, again contradicting the definition of scarcity. Hence, the definition that correctly represents scarcity is the one indicating a condition of being in short supply.