You have unlimited wants and limited …

Every economy faces the problem of scarcity. ‘Scarcity of resources’ implies that there are unlimited wants to be fulfilled by limited resources. The basic concern of an economy is to allocate the scarce resources to the best possible use in the face of unlimited wants. Thus, the problem of scarcity forces an economy to make a choice among various alternatives. For example, an economy endowed with a given level of resources has to make a choice between the production of guns and breads. The choice of the economy (i.e. either to produce guns or bread and in what quantities) depends on the need and goal of the economy. While the production of bread will make the economy devoid of the security level, whereas, the production of guns will not provide sufficient food for the population. The same problem of scarcity can be felt at an individual level. For example, with a given amount of money say, Rs 20,000, one cannot buy a TV and a sofa set simultaneously. Thus, the individual needs to make a choice between the alternatives according to his/her priority.