According to basic economic assumptions, what does economics say about human desires and the availability of resources?

Introduction / Context:
The foundational problem in economics is the problem of scarcity. Nearly all introductory definitions of economics highlight the tension between unlimited human wants and limited resources. This question asks which statement captures that basic assumption. Recognising this assumption helps explain why choices, trade offs, and opportunity cost are central ideas in the subject.

Given Data / Assumptions:

• The focus is on the general assumptions about human wants and resource availability.
• We refer to standard textbook definitions of economics.
• We are comparing several statements about desires and resources.
• We assume rational decision making under scarcity, not unlimited resources.

Concept / Approach:
Economics is often defined as the study of how society allocates scarce resources among alternative uses to satisfy unlimited wants. The idea is that resources such as land, labour, capital, and time are limited, but human desires for goods and services tend to expand as income and technology grow. This mismatch forces economies to make choices about production and consumption, leading to opportunity cost and trade offs.

Step-by-Step Solution:
1. Identify the key pair of concepts the question is testing: human desires and resource availability.2. Recall the classical scarcity based definition of economics, which emphasises unlimited wants and limited means.3. Compare Option A, which states that people have unlimited desires but limited resources, with the standard textbook definition.4. Recognise that other options either reverse the relationship or introduce ideas not central to the basic assumption.5. Conclude that Option A is the correct statement of the basic economic assumption.

Verification / Alternative check:
Everyday experience confirms this assumption. As income rises, people often desire better housing, transportation, education, and leisure activities, so wants tend to expand. At the same time, individuals and societies face constraints in terms of time, money, natural resources, and production capacity. Because not all wants can be satisfied at once, choices must be made. This fits the idea of unlimited desires and limited resources much more closely than the alternative options.

Why Other Options Are Wrong:
Option B: Suggesting limited desires and unlimited resources contradicts reality and would eliminate the scarcity problem that economics is built upon.
Option C: While unplanned allocation can cause inefficiency, this is not the core assumption about desires and resources and is more a statement about planning and efficiency.
Option D: Behavioural economics studies deviations from rationality, but the traditional assumption in basic models is rational decision making under scarcity, not emotional decisions as a defining feature.
Option E: This reverses the scarcity concept and would imply there is no need to study allocation of resources.

Common Pitfalls:
Some students focus too narrowly on money as the scarce resource and forget that time, skills, and natural resources are also limited. Others think that if a country is rich, scarcity does not apply, but even rich economies must choose between competing uses of resources. Remember that scarcity is a universal condition that arises from the interaction of desires and finite resources, which is why economics is relevant everywhere.

Final Answer:
Economics assumes that people have unlimited desires but limited resources.