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In short:
Unlimited wants together with limited resources create scarcity.
We have seen what economics studies. Let us now see the three questions it tries to answer.
Which are the three key questions in economics?
Key question
What it asks
What to produce
Which goods and services should be produced, and in what quantity
How to produce
Which methods, resources and technologies should be used
For whom to produce
Which group of people the goods and services are produced for
Why do these three questions arise?
- Wants are unlimited, but resources are limited.
- This mismatch between the two is called scarcity.
- Scarcity forces us to make choices.
- These choices give rise to the three key questions of economics.
Let us start with the first question - what to produce.
How scarcity leads to the three questions
Unlimited wants
+ limited resources
Scarcity
Choices
What to produce
How to produce
For whom to produce
Worth remembering:
All three questions come from one single fact - our wants are unlimited, but our resources are not.
1. What is scarcity?
Show answer
The mismatch between unlimited wants and limited resources.
2. Which three key questions does economics try to answer?
Show answer
What to produce, how to produce, and for whom to produce.
3. Fill in the blank: scarcity forces us to make ______.
Show answer
Choices.
📝 What Have We Learned
- Unlimited wants together with limited resources create scarcity.
- Scarcity forces us to make choices.
- Those choices give rise to the three key questions of economics.
