Question

Explain why scarcity leads to tradeoffs.

Short answer

Scarce resources can be used for several purposes so tradeoffs have to made between different uses of resources.

Step-by-step solution

Concept 

Scarcity indicates that the need for a good or service is greater than the availability of the good or service. The goods and benefits of any nation are restricted, which can lead to scarcity.

Example

In this world, the resources available are limited but they have alternative uses, and the wants and needs are unlimited, this leads to scarcity.

Suppose a person needs a new bike but with their limited income they have other uses such as purchasing books, or paying rent, etc. They have to thus make a tradeoff between these uses of income because of the scarcity of income.