Human beings have unlimited wants. That is to say that there is never such a time that a human being is satisfied and not in need of anything. On the other hand, resources available in nature, which should be used to meet those human wants, are limited. The available resources can never be enough to satisfy all human needs. This phenomenon, where there are unlimited human wants which are to be met by very limited resources, is essentially what economists call scarcity. Scarcity is referred to as the fundamental economic problem, and all economic activities revolve around trying to solve this problem. In view of scarcity, a good which is usable but in abundant supply may not qualify to be called an economic good. Air and water, for example, are just ‘goods’ in the sense that they are readily available and cannot be deemed to be scarce. Economic goods are presumed to be scarce in supply, that is to say, they cannot at one time meet the demand of humans. The concept of scarcity is so vital in modern economics that it informs a later-day definition of economics, which states that economics is the study of human actions and behavior as a relationship between ends and scarce means which have alternative uses.
Along with scarcity comes another equally important concept in economics: Choice. Choice comes about as a result of scarcity, and in a way, choice is informed by these circumstances. Here is how it comes about: Since human wants are unlimited and resources limited, it emerges that one cannot be able to practically meet all their wants at any one time. Because of this, it becomes inevitable for someone to choose between the many unlimited wants which one to satisfy at any given moment. This, in economics, is not just a conscious decision; it is an inevitable action that one has to take. Whether or not you consciously decide to skip something, you should realize that somehow you can only do one thing at a time. This is very important.
Since you make a choice of doing something, or fulfilling a certain want, it turns out that at any one time, there is a certain want that you have to ignore, or forego, in order to fulfill another want. When you wake up to go to work or school in the morning, for example, you probably would have loved to sleep just a little more, but then you have to wake to wake up and leave for work because you must earn a living. In this scenario, it can be rightly assumed that you have foregone sleep in order to go to work.
A famous phrase people use nowadays is ‘there is no such a thing as free lunch’, and that is perhaps the best way of saying it. Even if someone is offering to buy you lunch, you have to sacrifice time which you would have spent doing something else. Due to scarcity of resources, one therefore has to make a choice of which want to satisfy. By making a choice, it is inevitable that one will have to forego another one. This option that has been foregone is usually called an opportunity cost.