Question

Human wants are (LO1) a) relatively limited b) relatively unlimited c) easily satisfied d) about equal to our productive capacity

Short answer

b) Relatively unlimited: Human wants always change and are usually beyond our capacity to fulfill them entirely, which leads to the concept of scarcity and the necessity for choices in economics.

Step-by-step solution

Understanding the concept of human wants

Human wants are the desires that people have, which can be fulfilled by consuming goods or services. These wants are different for different individuals, and they keep changing over time as people's preferences and needs change.

Analyzing the given options

Now, we'll go through each option and analyze which of them accurately describes human wants. a) Relatively limited: This option suggests that human wants are limited in some way, which contradicts the concept that wants are always changing and can vary from individual to individual. b) Relatively unlimited: This option represents the idea that human wants are virtually limitless. People always have a desire for something, and as one want is fulfilled, another emerges. c) Easily satisfied: This option seems to imply that fulfilling human wants is not a difficult task. But, in reality, an individual may face challenges in satisfying their wants due to scarcity. d) About equal to our productive capacity: This option suggests that human wants are equal to our ability to produce goods and services. But in reality, our unlimited wants often surpass our productive capacity which leads to scarcity and the need for choices.

Selecting the correct answer

After analyzing the given options, we can conclude that the correct answer is: b) Relatively unlimited: Human wants always change and are usually beyond our capacity to fulfil them entirely, which leads to the concept of scarcity and the necessity for choices in economics.

Key concepts

Scarcity

The term 'scarcity' in economics refers to the fundamental issue of having seemingly endless human wants in a world of limited resources. Essentially, it's the problem of having infinite needs and desires in a setting with finite capabilities to satisfy them.

For instance, consider the air we breathe. It's abundant and available all around us, so it doesn't feel scarce. However, contrast that to something like diamonds or even clean drinking water in some parts of the world. Here, the demand far exceeds the supply, making them scarce resources. The scarcity of resources forces individuals, businesses, and governments to make economic choices, creating a priority list of what needs to be produced and consumed.

The Role of Scarcity in Human Wants

Since human wants are relatively unlimited, as stated in the textbook exercise solution, there's an ongoing tension between our desires and the available resources to fulfill them. This imbalance invokes the concept of opportunity cost, which is the next best alternative forgone when a choice is made. The understanding of scarcity not only lays the foundation for economic theory but also provides context for the practice of prioritizing and decision-making in daily life.

Productive Capacity

Productive capacity represents the maximum output a society can produce with its current resources and technology. Essentially, it's the ceiling of what's possible economically within a particular time frame given the constraints of labor, capital, technology, and natural resources.

Understanding Productive Capacity

For learners tackling the concept of productive capacity, it's crucial to recognize that it's not a fixed measure. Technological advancements, investment in infrastructure, education, and improvements in organizational efficiency can all expand a society's productive capacity.

However, at any given moment, a society's productive capacity is finite, which can lead to scarcity of goods and services as compared to human wants, which are described as relatively unlimited in the exercise. In other words, we cannot produce everything that everyone wants at all times because our resources and technologies have limitations. As such, productive capacity plays a direct role in economic choices, where societies decide how to allocate their limited resources to satisfy the greatest number of wants possible.

Economic Choices

Economic choices are the decisions made by individuals, businesses, and governments about what to produce, how to produce, and for whom to produce, given the constraints of scarcity and finite productive capacity. These choices involve weighing different alternatives and selecting the option that offers the best combination of benefits and costs.

Decision-Making in Economics

When it comes to human wants, as the original exercise showcases, they are virtually limitless, while the means to satisfy them are not. This is where economic choices come into play—balancing desires against the cold hard realities of limited resources.

To understand the implications of these choices, economists use the concept of opportunity cost, which is the value of the best alternative given up when a choice is made. Therefore, every economic choice implies a trade-off; selecting one option means forgoing another. This underscores the importance of making informed decisions, as each one can significantly impact the well-being of individuals and societies.