Which of the following is the central problem of economy?
Options
AUnemployment
BPoverty
CScarcity of resources
DInflation
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Introduction to Business EconomicsPYQ Jun 22Question 628 of 209
All Questions Correct Answer
✅ Option c — Scarcity of resources
All Options:
- AUnemployment
- BPoverty
- CScarcity of resources
- DInflation
Detailed Solution & Explanation
• The central problem of every economy, regardless of its type or stage of development, is the scarcity of resources. This fundamental concept in economics means that human wants are virtually unlimited, but the resources available to satisfy those wants are limited.
• This scarcity forces societies to make choices about what to produce, how to produce it, and for whom to produce it. These are often referred to as the three basic economic problems. Because resources like land, labor, capital, and entrepreneurship are finite, we cannot produce everything everyone desires.
• Therefore, option (C) Scarcity of resources is the correct answer. It is the underlying issue that gives rise to all other economic problems and decisions.
• Option (A) Unemployment and (B) Poverty are significant economic problems, but they are consequences or manifestations of how an economy deals (or fails to deal) with the problem of scarcity. For instance, unemployment can arise from inefficient allocation of scarce labor resources, and poverty from an unequal distribution of goods and services produced from scarce resources.
• Option (D) Inflation, which is a general increase in prices and fall in the purchasing value of money, is also an economic problem. However, it is typically a macroeconomic issue related to the management of money supply and aggregate demand, rather than the core problem that necessitates economic choices in the first place. Scarcity is the root cause that makes economic choices necessary.
About This Chapter: Introduction to Business Economics
Paper
Paper 4: Business Economics
Weightage
5%
Key Topics
Meaning, Scope, Price Mechanism
This chapter lays the groundwork for understanding Business Economics as a discipline. It covers the meaning, scope, and nature of economics — including key distinctions like Microeconomics vs Macroeconomics, Positive vs Normative economics, and the fundamental economic problem of scarcity. Students learn how businesses use economic principles for decision-making in a competitive marketplace.
View Official ICAI SyllabusExam Strategy Tip
Focus on definitions and distinctions between concepts. Questions often test whether you understand the difference between Micro and Macro, or Positive and Normative statements.
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