Question

Please describe the two-fold manner in which an economy demonstrates its purpose in addressing the issue of scarcity?

Answer 1

Scarcity is one of the main issues in economics.The issue of scarcity means how and what to produce from limited resources.So the problem is about scarcity and choice.Scarcity means we need to make choice.Choices need to be made by consumers ,businesses and government because of scarcity.But trade offs will have to be made while making choices.This means to choose more of one thing we need to give up something else in exchange. While making decisions people make the cost and benefit analysis of making the decision. Every choice that is made involves opportunity cost.Without scarcity there would be no need for economics because we would have anything that we need without cost or making any trade off.Economics tries to solve the problem of scarcity by charging higher price for goods which are scarce.