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CA Foundation · Business Economics · Nature and Scope of Business Economics

Which of the following is regarded as the root cause of the basic problems of an economy, such as what, how and for whom to produce?

The root cause of the basic economic problems is scarcity, meaning limited resources with alternative uses set against unlimited human wants. Because not every want can be met, society must choose what, how and for whom to produce, so scarcity and choice form the core of economics.

  1. AScarcity of resources relative to unlimited wantsCorrect
  2. BExcess supply of goods in the market
  3. CGovernment control over prices
  4. DPresence of money as a medium of exchange

Explanation

Resources such as land, labour and capital are limited, while human wants are unlimited. This scarcity forces every economy to choose what to produce, how to produce and for whom. Money, price control or excess supply do not create the central economic problem.

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