Which of the following statements best describes the study of economics? Economics studies how

• A. individuals and societies allocate scarce resources to satisfy unlimited wants
• B. markets always achieve perfect efficiency
• C. governments set prices for goods and services
• D. businesses maximize profits without considering resource limitations

Answer: (A)

Verified step by step guidance

1. Understand that economics is fundamentally about the allocation of scarce resources. Scarcity means that resources are limited, but human wants are unlimited.
2. Recognize that economics studies the choices individuals and societies make to allocate these limited resources efficiently to satisfy as many wants as possible.
3. Evaluate each statement by checking if it captures the core idea of scarcity and allocation: for example, 'markets always achieve perfect efficiency' is a specific outcome, not the broad study of economics.
4. Note that 'governments set prices for goods and services' is a role some governments play, but it does not define the entire field of economics.
5. Similarly, 'businesses maximize profits without considering resource limitations' ignores the fundamental concept of scarcity, which is central to economics.