Using practical example from the field of economics, compare and contrast why scarcity and choice are basic problems of economics. Illustrate your understanding of scarcity and choice by discussing and explaining possible two reasons for their existence.

Using practical example from the field of economics, compare and contrast why scarcity and choice are basic problems of economics. Illustrate your understanding of scarcity and choice by discussing and explaining possible two reasons for their existence.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter1: Introducing The Economic Way Of Thinking

Section: Chapter Questions

Problem 4SQ

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Scarcity and choice are important in economics because there would be no economy if there was no scarcity (limitation in resources) and no choice as to how these resources would be used. Scarcity and choice are the founding blocks of the story of economics. Scarcity in economics refers to limited resources against unlimited wants. Choice is the alternative between them. Economics deals with the study of human behavior and how humans allocate their limited resources (scarcity) with their unlimited wants. Since we have limited resources, we usually have to choose one option (choice) and forgo the other. This phenomenon is called "opportunity cost" . Our wants change when we consume more of one particular option, Its value diminishes and we start preferring some other option. This is called 'utility' or 'diminishing utility' as a progressive term. Example: If you are in school and you only have $10 for lunch money (scarcity), you can either buy a…
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