CA Foundation · Business Economics · Nature and Scope of Business Economics
Which of the following is the root cause of all the basic economic problems that every economy must solve?
The root cause of basic economic problems is scarcity: limited resources with alternative uses face unlimited human wants. Because not all wants can be satisfied, every economy must choose what to produce, how to produce and for whom, making scarcity the foundation of economic choice.
- AExistence of money and banking systems
- BScarcity of resources relative to unlimited wants having alternative usesCorrect
- CGovernment control over production
- DUnequal distribution of income among households
Explanation
Resources such as land, labour and capital are limited, while human wants are unlimited and the resources can be put to alternative uses. This forces every economy to choose, giving rise to the central problems of what, how and for whom to produce. Unequal income distribution is a consequence, not the root cause.
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