Economics is a social science that (A) is primarily concerned with money. (B) is primarily concerned with how resources are used. (C) relies solely on the scientific method for analysis. (D) is primarily concerned with maximizing spiritual well-being. (E) is purely normative.
The Correct Answer and Explanation is:
Correct Answer: (B) is primarily concerned with how resources are used.
Explanation:
Economics is a social science that focuses on how individuals, businesses, governments, and societies allocate scarce resources to satisfy their unlimited wants and needs. Therefore, the correct answer is (B) is primarily concerned with how resources are used.
At the heart of economics is the concept of scarcity—the idea that resources (such as time, money, labor, raw materials, and capital) are limited, while human desires are virtually infinite. Because of this, societies must make decisions about how to allocate these scarce resources efficiently. Economics studies these decisions and the trade-offs involved.
Economics is often divided into microeconomics and macroeconomics. Microeconomics focuses on the behavior of individuals and firms and how they interact in markets, while macroeconomics looks at the economy as a whole, including issues like inflation, unemployment, and economic growth.
Let’s examine why the other options are incorrect:
- (A) While money is an important part of economics, it is not the primary focus. Economics is broader—it studies all forms of resource allocation, not just monetary transactions.
- (C) Economics does use the scientific method and empirical analysis, but it also involves normative aspects and subjective judgments, especially in policy debates.
- (D) Spiritual well-being is more aligned with philosophy or religion than economics. Economics might consider well-being in terms of utility or happiness, but it does not focus primarily on spiritual aspects.
- (E) Economics includes both positive (what is) and normative (what ought to be) analysis. It is not purely normative.
In summary, economics is primarily concerned with the allocation of scarce resources and the choices people make to achieve the best possible outcomes given those limitations.
