GED Social Studies Practice Test: The Biggies: Scarcity and Choice

A difficult but inescapable truth: resources are limited. There’s only so much gold in the world (that’s why it’s so expensive). If coffee grew everywhere on the planet, its price would be much lower. And, as you probably know, you have only so much money at any given time.

Another difficult but inescapable truth: wants tend to be unlimited. If one stick of gum is good, three are better. You want more money (who doesn’t?). Maybe you want to buy a new car every year. Scarcity is the central issue in economics, and determines almost all economic behavior. Here’s a diagram that may help you understand these concepts:

econ pic 1

One thing to keep in mind when discussing needs and wants is that there are basic needs (also called necessaries) such as food, clothing, and shelter. Higher-order wants, such as a race car or a handmade suit are in the “nice-to-have-but-not-need-to-have” category. They might be better called wants. A Rolls-Royce isn’t going to do you much good if you don’t have enough food to eat.

 

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