The problem of scarcity and choice go hand in hand. Basically, scarcity of resources explains why people are prompted to make a choice among the existing alternatives. Indeed, the problem of choice is the essence of scarcity. The choice made between the existing alternatives must provide maximum satisfaction or returns.

People do not have the resources they need to satisfy their needs because human needs are unlimited. Therefore, people should make decisions or choices which require them to give up on something commonly known as the opportunity cost. In other words, people should be capable of making decisions that yield optimal results from the limited resources. A perfect example explaining the use of limited resource such as time is a situation requiring a student to make a choice between watching a soccer game or studying for his exams. If the student decides to study for his exam, he foregoes the option of watching which is the opportunity cost.