Which term refers to the study of how people allocate limited resources to satisfy unlimited wants?

• A. Economy
• B. Economics
• C. Normative economics
• D. Positive economics

Answer: (B)

Scarcity creates the need to choose how to use limited resources. Economics is the study of how people allocate those scarce resources to satisfy unlimited wants. It looks at decisions by individuals, firms, and societies about using money, time, land, and labor to produce and distribute goods and services, and it examines the trade-offs and opportunity costs involved in those choices. The term economy refers to the system of production and exchange itself, not the scholarly study. Normative economics deals with what ought to be, based on values, while positive economics describes how the economy actually works. Since the question is about the field that analyzes allocation and decisions under scarcity, the correct term is economics.