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Scarcity in economics refers to the fundamental condition where human wants and needs exceed the available resources, forcing individuals and societies to make choices about allocation.
This principle underscores that nothing is truly free because using a resource for one purpose means forgoing its use elsewhere, creating opportunity costs.
Value, on the other hand, is the worth assigned to goods, services, or resources, often determined subjectively based on their utility or ability to satisfy needs and desires.
The interplay between scarcity and value is evident in how limited supply can increase an item's perceived worth, as seen in the law of supply and demand where prices rise when demand outstrips supply.
Ultimately, understanding these principles helps explain economic behaviors like trade-offs, incentives, and market dynamics that drive resource distribution in society.
Take the quiz: What does scarcity in economics primarily refer to?