CMA Foundation · Fundamentals of Business Economics and Management · The Fundamentals of Economics
Which of the following statements best explains why scarcity exists in every economy?
Scarcity exists because human wants are unlimited whereas the resources available to satisfy them, such as land, labour and capital, are limited and have alternative uses. This applies to rich and poor economies alike, so choice and allocation become necessary everywhere.
- AHuman wants are unlimited while the resources available to satisfy them are limitedCorrect
- BResources are limited only in poor countries
- CMoney is not available with households
- DGovernments restrict the production of goods
Explanation
Scarcity arises from the gap between unlimited wants and limited resources that have alternative uses. It is not confined to poor countries, and it is not caused merely by shortage of money or by government restrictions. Hence the first option is correct.
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