Which of the following is a key assumption of economics?

In economics, a foundational assumption is that while human wants are virtually limitless, the resources available to satisfy these wants are finite. This creates the basic economic problem of scarcity, prompting individuals and societies to make choices about how to allocate their limited resources effectively.

This assumption is critical because it underlies the entire study of economics, influencing concepts such as supply and demand, pricing, and the trade-offs that consumers and producers face. The recognition of scarcity drives the need for prioritization and resource management in both personal finance and broader economic policy.

The other options do not align with this fundamental principle. The idea that all resources are infinite contradicts the very definition of scarcity. Claiming that consumers always act irrationally is also not a widely accepted assumption in economics, as the theory often presumes rationality in decision-making. Lastly, the belief that government intervention is always beneficial does not reflect the complexity of economic systems, where intervention can sometimes lead to unintended consequences. Hence, the correct understanding of economics hinges on the acknowledgment of unlimited wants alongside limited resources.