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A Study Guide for the Ohio Ninth-Grade Citizenship Proficiency Test
Economic Systems Cultural Diversity

Q. Economic Concepts
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All levels of government - national, state, county, and city - provide services to the public. We expect government to provide for national defense, public education, snow removal, and a variety of other services. In order to provide services, government needs to raise revenue. The primary method of raising revenue by government is taxation. The public pays taxes so that the government has money to provide the services we expect.

The national government raises the largest part of its revenue through income taxes on business and individuals. Other sources of revenue include customs duties - a tax on goods brought into the United States, and estate taxes - a tax on a deceased person's property and possessions.

Ohio, like all other states, collects taxes too. Much of Ohio's revenue comes from sales taxes, income taxes, inheritance taxes, and business license fees.

Taxes most commonly collected by local governments include property taxes, sales taxes, license fees for dogs and fishing, and other fees for activities such as parking and camping.


In any nation, regardless of its economic system, a problem arises because there are not enough resources or goods to meet the needs or wants of the people. This problem of unlimited wants and limited resources is known as scarcity. Scarcity is the fundamental economic problem of every nation. No country has unlimited resources. Each nation must make choices about what to produce and how much to produce.

The classic example of the problem of scarcity for a nation is the need to produce guns and butter. No nation produces all the guns and butter its people need and want because there are limited resources. Therefore, nations must choose how many guns and how much butter to produce to best satisfy their needs. If too many guns are produced, a nation might feel safe and secure, but not have enough food for people to eat. If too much butter is produced, a nation might have enough food to eat, but not enough weapons to protect itself from attack or invasion.

On an individual level, people also have to face the problem of scarcity. Most people have limited resources and unlimited wants. Therefore, people must choose how to use their limited resources to best satisfy their unlimited wants. For example, a check for $100 would not satisfy all your wants. You would need to decide how to spend that limited amount of money to best satisfy your unlimited wants. If the check was for $1,000, it would still not satisfy all your wants. It would, of course, satisfy more of your wants than the $100. However, you would still need to choose to buy some goods now, and wait to buy other goods later.


All nations have wants they cannot satisfy by themselves, because they do not have the resources. Therefore, nations find it necessary to trade with one another to satisfy their needs. Nations sell goods and services in which they specialize and have a surplus. Money made from such trade is used to purchase needed goods and services other nations can provide.

Japan is one of the world's great economic powers. Yet it produces no oil. Japan specializes in products such as cars and electronics. It produces many such products in order to sell them to other countries. Using money made by selling the goods in which the Japanese specialize, Japan buys the oil it must have.

Although the United States has oil, its oil resources are limited. It must trade with other countries to buy oil, as well as other goods and services which it needs.

No nation is economically independent. All nations are interdependent. Because nations have limited resources, they need to trade with each other to satisfy their wants.

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