Introduction to Business EconomicsMODULEQuestion 730 of 209
All Questions

In every economic system, scarcity imposes limitations on

Options

Ahouseholds, business firms, governments, and the nation as a whole.
Bhouseholds and business firms, but not the governments.
Clocal and state governments, but not the federal government.
Dhouseholds and governments, but not business firms.
For any discrepancies in this question, email contact@cadada.in

Correct Answer

✅ Option a — households, business firms, governments, and the nation as a whole.

All Options:

  • Ahouseholds, business firms, governments, and the nation as a whole.
  • Bhouseholds and business firms, but not the governments.
  • Clocal and state governments, but not the federal government.
  • Dhouseholds and governments, but not business firms.

Detailed Solution & Explanation

• Scarcity is a fundamental economic problem where unlimited human wants exceed the limited resources available to satisfy those wants. This applies universally. • Every economic system, regardless of its structure (capitalist, socialist, mixed), faces the challenge of scarcity. This means decisions must be made about how to allocate limited resources. • Households (consumers) face scarcity because their income and time are limited, restricting the goods and services they can purchase. • Business firms face scarcity because they have limited capital, labor, and raw materials, which constrains their production capacity. • Governments, at all levels (local, state, federal), face scarcity because tax revenues and other resources are finite. This limits their ability to fund public services like infrastructure, education, and healthcare. • Therefore, scarcity imposes limitations on all economic agents within a nation – households, business firms, and governments – and consequently, on the nation as a whole. This makes option (A) the correct answer. • Option (B) is incorrect because governments, just like households and firms, operate with limited budgets and resources, meaning they are also constrained by scarcity. • Option (D) is incorrect because business firms are heavily impacted by scarcity in terms of raw materials, labor, and capital, which directly affects their production and profitability.

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 Syllabus

Exam 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.

Related Comparison Tables

Microeconomics vs Macroeconomics: The Complete CA Foundation GuidePositive vs Normative Economics: Fact vs Opinion

More Questions from Introduction to Business Economics

A study of how increases in the corporate income tax rate will affect the nation unemployment rate is an example of

In a ______ the producer is free to set up any type of firms produce goods and services of his choice.

In the beginning the word economics was

In Economics, we use the term scarcity to mean;

In a free market economy, allocation of resources is determined by

If there is no central planning authority to make the fundamental economic decisions and thus to allocate productive resources, how can then free enterprise or capitalist economy solve its central problems?

Ready to Master Introduction to Business Economics?

Practice all 209 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.

Start Practicing — It's Free