1.1.1 Scarcity and Choice

• What is scarcity in economics?

  Resources are limited
• Economic cost includes monetary expenditure on resources, while opportunity cost reflects missed benefits.


  True
• Opportunity cost differs from economic cost because it reflects the value of the missed opportunity
• Opportunity cost is the value of the next best alternative forgone
• Why does scarcity necessitate choices about resource allocation?

  Resources are limited
• Scarcity arises when resources are unlimited relative to unlimited wants and needs.

  False
• Arrange the following factors causing scarcity in order of their relevance:

  1️⃣ Limited Resources

  2️⃣ Increasing Population

  3️⃣ Technological Advancements

  4️⃣ Environmental Factors
• During a pandemic, the allocation of hospital beds highlights the scarcity of resources
• What is the primary difference between needs and wants?

  Needs are essential for survival
• Economic cost reflects the actual monetary expense, while opportunity cost reflects the value of the missed opportunity.


  True
• Match the factors of scarcity with their examples:

  Limited Resources ↔️ Finite oil reserves limit fuel production

  Increasing Population ↔️ Higher demand for food increases prices

  Technological Advancements ↔️ Smart devices increase demand for rare minerals

  Environmental Factors ↔️ Droughts reduce agricultural yields
• Scarcity occurs when resources are limited relative to unlimited wants and needs
• What is the primary difference in allocation between needs and wants?

  Needs are prioritized due to necessity
• What is a primary factor that contributes to scarcity?

  Limited resources
• Give an example of scarcity in household budgeting.

  Limited income
• Wants are essential for survival, whereas needs are driven by consumer preferences.

  False
• Opportunity cost is the value of the next best alternative forgone
• What is the fundamental cause of scarcity?

  Unlimited wants vs limited resources
• Order the factors contributing to scarcity from those related to resource availability to environmental impacts:

  1️⃣ Limited Resources

  2️⃣ Increasing Population

  3️⃣ Technological Advancements

  4️⃣ Environmental Factors
• Needs are basic requirements for survival, while wants are desires that improve quality of life but are not essential.


  True
• Match the economic systems with their allocation methods:

  Market System ↔️ Prices determined by supply and demand

  Command System ↔️ Government controls resource distribution

  Mixed System ↔️ Blends market and command mechanisms
• During the COVID-19 pandemic, the scarcity of ventilators led to resource allocation based on medical priority.


  True
• Scarcity is the basic economic problem where resources are limited but desires are unlimited