In an economy, the problem of choice arises. Arrange the following in order: (A) Leads to scarcity of resources (B) Demands are unlimited (C) Problem of choice arises (D) Our resources are limited Choose the correct answer from the options given below:
(D), (B), (A), (C)
Understanding the Problem of Choice in Economics
The problem of choice is a fundamental concept in economics. It arises because individuals and societies face a situation where their desires (wants) are essentially unlimited, but the means available to satisfy these desires (resources) are limited or scarce. This fundamental imbalance between unlimited wants and limited resources creates the need to make choices about what to produce, how to produce, and for whom to produce.
Logical Sequence of Economic Concepts
Let's break down the statements provided and arrange them in a logical sequence that explains how the problem of choice arises:
- (A) Leads to scarcity of resources: Scarcity is a result, not a starting point in this specific chain, though it is a pervasive condition.
- (B) Demands are unlimited: This describes one side of the core economic problem – human wants and desires have no limit.
- (C) Problem of choice arises: This is the consequence or outcome of scarcity.
- (D) Our resources are limited: This describes the other side of the core economic problem – the availability of resources like land, labour, capital, and entrepreneurship is finite.
The logical flow starts with the basic economic conditions:
- Resources are limited. (D)
- Demands (or wants) are unlimited. (B)
- The combination of limited resources and unlimited demands leads to a situation of scarcity. (A)
- Because of scarcity, we cannot satisfy all wants, and thus, we must make choices. The problem of choice arises. (C)
Therefore, the correct logical order is (D), (B), (A), (C).
Step-by-Step Analysis
Let's examine the progression:
Step 1: The Starting Point
The economy operates with a given amount of resources. Statement (D) directly addresses this: "Our resources are limited." This is a fundamental constraint.
Step 2: Human Wants
At the same time, human desires for goods and services are not limited by resource availability. Statement (B) captures this: "Demands are unlimited." People always want more or better things.
Step 3: The Result of the Conflict
When unlimited demands meet limited resources, it creates a situation where not everything that is wanted can be produced or consumed. This condition is known as scarcity. Statement (A) describes this consequence: "Leads to scarcity of resources." Scarcity is the gap between what is wanted and what is available.
Step 4: The Consequence of Scarcity
Because resources are scarce, it is impossible to satisfy all wants. Decisions must be made about which wants to satisfy and which to leave unsatisfied. This necessity of making selections is where the problem of choice comes into play. Statement (C) states: "Problem of choice arises." This is the direct result of scarcity.
Putting it all together, the sequence is:
| Statement | Description | Position in Sequence |
|---|---|---|
| (D) Our resources are limited | Fundamental constraint | 1st |
| (B) Demands are unlimited | Nature of human wants | 2nd |
| (A) Leads to scarcity of resources | Result of limited resources and unlimited demands | 3rd |
| (C) Problem of choice arises | Consequence of scarcity | 4th |
The correct order is therefore (D), (B), (A), (C).
Revision Table: Key Economic Concepts
| Concept | Definition | Relationship to Choice Problem |
|---|---|---|
| Limited Resources | The finite availability of factors of production (land, labor, capital, entrepreneurship) | A core reason for scarcity and choice. |
| Unlimited Demands/Wants | The insatiable nature of human desires for goods and services | Another core reason for scarcity and choice. |
| Scarcity | The condition where unlimited wants exceed limited resources | The direct cause of the problem of choice. |
| Problem of Choice | The need to decide how to allocate scarce resources among competing unlimited wants | The fundamental economic problem arising from scarcity. |
Additional Information: Economic Problems
The problem of choice is often discussed in the context of the central economic problems faced by any economy:
- What to Produce? Given limited resources, which goods and services should be produced and in what quantities?
- How to Produce? What methods or techniques of production should be used? This relates to combining factors of production efficiently.
- For Whom to Produce? How should the goods and services produced be distributed among the members of society?
These questions directly stem from the fundamental problem of scarcity and the need to make choices.
Important Questions from Economics and Central Problems of Economy
If the value of Investment Multiplier is 5 and the increased income is ₹ 800 crore in an economy, then find the value of change in the investment in the economy.
Which of the following statements are true?
(A) Quantitative tools control the extent of money supply by changing the CRR.
(B) There are two types of open market operations – outright and upright.
(C) A fall in the bank rate can decrease the money supply.
(D) Selling of a bond by RBI leads to reduction in quantity of reserves.
(E) The RBI can influence money supply by changing the rate at which it gives loan to the commercial banks.
Choose the correct answer from the options given below:
Paradox of Thrift means :
Match List-I with List-II:
List-I List-II (A) Bank Rate (I) Securities are pledged in order to repurchase (B) Marginal Standing Facility (II) Minimum rate at which funds are provided for long term (C) Repo Rate (III) Also known as Penal Interest Rate (D) Reverse Repo Rate (IV) Central Bank borrows funds from commercial banks Choose the correct answer from the options given below:
Which of the following is not a function of Central Bank ?
