Scarcity exists because our limited resources cannot satisfy our unlimited wants. Choice results because of scarcity. The inability to satisfy all wants means that we must choose amongst our alternatives.
Marginal analysis is the process by which choices are made.
Optimal decision making entails equating the marginal benefit of an activity with its marginal cost. This maximizes the net benefits of the activity. The principle of substitution decribes what happens when optimal decisions have been made and then something changes. A rise in the marginal cost leads individuals to substitute alternatives for the activity whose cost has risen. A rise in the marginal benefit leads individuals to substitute the activity whose benefit has risen for other activities.