What is the definition of economics?

The correct answer defines economics as the study of how individuals and societies allocate scarce resources to meet their needs and desires. This definition captures the essence of economic activity, emphasizing the fundamental concepts of scarcity—since resources are limited, choices must be made about how to use them effectively. It also highlights the relationship between limited resources and the various ways individuals and societies prioritize and satisfy their needs and wants.

Understanding this definition allows for a greater comprehension of various economic concepts, including resource allocation, opportunity cost, and trade-offs. It forms a foundation for studying broader economic issues, such as market behavior, consumer choice, and public policy. This perspective is critical in analyzing how decisions are made at both microeconomic (individual and firm level) and macroeconomic (national and global level) scales.