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 23Question 629 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 stems from the fundamental concept of scarcity. Scarcity means that human wants are virtually unlimited, but the resources available to satisfy those wants are limited. This imbalance forces societies to make choices about what to produce, how to produce it, and for whom to produce it.
• Option (C) Scarcity of resources is the correct answer because it is the root cause of all economic problems. If resources were infinite, there would be no need for economics as a discipline, as all wants could be satisfied without choice or allocation. The need to allocate scarce resources among competing uses is what defines the central problem of an economy.
• Option (A) Unemployment and Option (B) Poverty are significant economic problems, but they are consequences or manifestations of the central problem of scarcity, not the central problem itself. Unemployment arises when an economy cannot effectively utilize its scarce labor resources, often due to insufficient demand or structural issues. Poverty results from an unequal distribution of scarce resources or an inability to access sufficient resources to meet basic needs.
• Option (D) Inflation is also an economic problem, referring to a sustained increase in the general price level of goods and services. While it affects the purchasing power of scarce money, it is a macroeconomic issue that can be caused by various factors, including excessive money supply or demand exceeding the available scarce supply of goods, but it is not the fundamental problem that drives all economic decision-making.
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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