Economics → Quiz → Economics Definition

Definition (Economics)
Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.

Since, resources are limited, and our wants are unlimited, it is important that an economy must use its resources efficiently. Thus, the two fundamental ideas in the definition are Scarcity and Efficiency.

Scarcity
A situation of scarcity is one in which goods are limited relative to desires.

Efficiency
Efficiency denotes the most effective use of a society’s resources in satisfying people’s wants and needs.

Needs
Needs are those commodities, which are essential for our sustenance, like, peace, food, clothes, home, transport etc.

Wants
Wants are those commodities which are NOT essential, but we like to have with us, like, food at restaurant, new car, entertainment etc.