How is scarcity defined in economic terms?

Scarcity in economic terms is fundamentally defined as a situation where the resources available are insufficient to meet the unlimited wants and needs of individuals. This concept is central to economics because it necessitates the need for choices and prioritization in resource allocation.

The definition aligns with the notion of demand exceeding supply, which characterizes the fundamental problem of scarcity. When the quantity demanded surpasses the quantity supplied, it highlights that there is not enough of a good or resource available to satisfy all those who desire it, thus illustrating scarcity.

In this context, options that suggest abundance, perfect allocation of resources, or a situation where supply exceeds demand do not depict scarcity, as they assume either an excess of goods or a balance that contradicts the very nature of scarcity. Therefore, the option that describes the imbalance between demand and supply serves as a precise and appropriate illustration of scarcity in economics.