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30 Chapter 1
37 PROBLEM OF SCARCITY
46 AND CHOICE
62

67 Q.1. Explain the concept of opportunity cost and discuss how it relates to the
[2010 (E)
problem of choice between alternatives. relation to
76 Ans. Scarcity means limnitation of the availability of resources in completely
to
their wants. That means the available resources are not enoughsatisfy
to with the
satisfy all the wants. If we decide and choose which want have to leave unsatisfied. We
available resources, then there are other wants we
86 have to forgo something in order to satisfy a want. The want that is forgone is
as 'the next best alternative' or
called the 'opportunity cose. It is also known opportunity cost can be
P-1 alternative cost. The concept of scarcity, choice and
For an individual, it may involve
wards shown in many ways at different levels. For example, a student may have to
choosing the best from the choices available.
choose between doing A levels and going for adiploma right after finishing
means the other option has to be forgone. A firm
O levels. Choosing one optiondifferent production methods. Each and every level
may have to choose between choices as
agent (índividuals, firms or government) has to make the
of economic central economic problem of the
scarcity.
all of them are confronted with the best possible way to allocate resources
Governments have to decide on factories must be built), the firms have to
(Example-where and what kind of and
maximize profit (what is the most efficient way to produce gods)
willgive
decide how to maximize their welfare (uhich goods
individualshave to decide how to of making, this choice they have to give up
process
them most satisfaction). In the
concept of opportunity cost is applicable tor each
and
other alternatives, so the
agents. help
every level of economic
on Production Possibility Curve. How does it (E)
Q 2. Write a short note problems of an economy? [2010 (R): 2010
central alternative pro
in understanding the possibility curve represents graphicallyrescurces of the
Ans. The productionopen to an economy. The productive
duction possibilities 1