Paper 3 · basic economic problem / scarcity
What is meant by the basic economic problem of scarcity?
AA situation where government spending exceeds the tax revenue it collects in a given year, forcing it to borrow money or raise taxes to cover the shortfall.
BUnlimited human wants for goods and services, set against limited resources available to satisfy them, forcing choices to be made.
CA shortage of a particular good at its current price, which encourages firms to raise that price.
DResources being left idle or wasted because a firm produces below its maximum possible output.
Explanation: Scarcity is the mismatch between society's unlimited wants and the limited land, labour, capital and enterprise available to satisfy them, which is why every economic decision involves a choice and an opportunity cost. A budget deficit, a market shortage at a given price, and idle productive capacity are all separate economic concepts, not the definition of scarcity itself.
Derived from ZIMSEC Economics Paper 3, June 2007, Q1
