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Main idea: Scarcity exists because people’s incomes and time are limited.

The BIG Idea

Scarcity is the basic economic problem that requires people to make choices about how to use limited resources.

Why It Matters

Have you ever wanted to buy something or to participate in an activity, but you couldn’t because you didn’t have enough income or time? How do scarce resources like time and income affect you and everyone around you? In this chapter, read to learn about what economics is and how it is part of your daily life.

Section 1. The basic problem in economics

Starting at a very young age, many Americans use the words want and need interchangeably. How often do you think about what you “want”? How many times have you said that you “need” something? When you say, “I need some new clothes,” do you really need them, or do you just want them? As you read this section, you’ll find that economics deals with questions such as these.

Wants, Needs, and Choices

Main idea: The basic problem in economics is how to satisfy unlimited wants with limited resources.

Economics & YouThink of the last time you said that you needed something. Was the object really necessary for your survival? Read on to learn that people must make choices about how to spend their limited resources.

What, exactly, is economics? Economicsis the study of how individuals, families, ____1____, and societies use limited resources to fulfill their unlimited wants. Economics is divided into two parts. Microeconomics____2___ behavior and decision making by small units such as individuals and firms. Macroeconomicsdeals with the economy as a whole and decision making by large units such as ____3____. People often confuse wants with needs. When they use the word ____4____, they really mean that they want something they do not have. Obviously, everyone needs certain things, such as food, clothing, and shelter, to survive. To economists, however, anything other than what people need for basic survival is a ____5____. People want such items as new cars and electronics, but they often ____6____themselves they need these things. In a world of limited resources, individuals ____7____their unlimited wants by making choices.

Like individuals, businesses must also ____8____. Businesspeople make decisions daily about what to produce now, what to produce later, and what to stop ____9____. Societies, too, face choices about how to utilizetheir ____10____. How these choices are made is the focusof economics.

ExplainingWhat do people have to do when faced with ____11____ and limited resources?

The Problem of Scarcity

Main idea: Scarcity exists because people’s incomes and time are limited.

Economics & YouIf you were very wealthy, would your resources be unlimited? Read on to learn why scarcity exists for everyone.

The need to make choices arises because everything that exists is limited, although some items (such as trees in a large forest) may appear to be in abundant ____12____. At any single moment, a fixed amount of resources is ____13____. At the same time, people have competing uses for these resources. This situation results in scarcity—the basic problem of economics.



____14____means that people do not and cannot have enough income and time to satisfy their every want. What you buy as a student is limited by the amount of income you have. Even if everyone in the world were rich, however, scarcity would continue to exist, because even the richest person in the world does not have unlimited time. (See Figure 1.1below.)

Do not confuse scarcity with shortages. Scarcity always exists because of competing alternative uses for resources, whereas shortages are temporary. ____15____often occur, for example, after hurricanes or floods destroy goods and property.


Date: 2015-12-11; view: 650


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