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Homework answers / question archive / Explain how unlimited desires and limited resources combine to create the need for economic analysis Assignment: Two of the most fundamental concepts in microeconomics are the assumptions that people have unlimited wants, and that resources to satisfy those wants are limited
Explain how unlimited desires and limited resources combine to create the need for economic analysis Assignment: Two of the most fundamental concepts in microeconomics are the assumptions that people have unlimited wants, and that resources to satisfy those wants are limited. Write a brief essay that answers the following questions:
1.What does it mean for individuals to have unlimited wants?
2. Why can't individuals have everything they want?
3. How do unlimited wants and limited resources lead to individual choice in microeconomics?
It is important to understand that in reality humans are faced by the challenge of understanding that the Earth comprises of a large population that keeps on increasing with time and as understood the resources are limited, predetermined and cannot be increased or decreased according to the requirements of the population. This gives rise to the major economic problem of being able to allocate these given predetermined resources among the population.
The problem of choice is also a major issue that is analysed in the field of economics. This means that the people are required to choose between their multiple wants and meet a few according to the allocated resources and their budgets.
1) It is obvious that the human wants are unlimited considering two factors. One being that the size of the population is increasing which means the mouths to be fed will increase and the other aspect is that if we eat one day, it does not mean that we will not be hungry the other day, therefore, considering this dimension we see that the demand for goods and services is never ending and even if one demand is met, some other demand arises. This is an infinite loop that is a major characteristic of the human race.
2) We are the most superior race on the Earth characterized by complex needs and desires. These needs and demands are not only endless but also multiplying and repetitive. However, the resources that are employed to fulfill these are limited and simple. If we were to feed 10 people with ingredients enough to feed 4 people, then obviously some people would have to stay hungry or sleep with a stomach that is half filled. This explains that only a limited number of resources are available on Earth, the optimal usage of which is totally dependent on the people and economists. Therefore, even though there are 10 people that need to be fed, some will have to give up on their demand for food considering the restraints of resources.
3) One need may be preferred over the others as a result of individual choice. This means that considering the unlimited wants of the people and the limited resources there is a need to prioritize needs and demands according to certain parameters like urgency, degree of satisfaction and so on. Therefore, a person is required to make a choice among his various needs as all of them cannot be fulfilled.