Multiple Choice
Which statement best explains why economies must make choices about how to allocate resources?
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0. Basic Principles of Economics
Scarcity and Choice
Multiple Choice
Which of the following best describes the difference between a shortage and scarcity?
A
Scarcity can be eliminated by increasing production, while shortages cannot.
B
A shortage is a permanent condition, while scarcity is temporary.
C
Scarcity only happens in developing countries, while shortages occur in developed countries.
D
Scarcity refers to the limited nature of resources, while a shortage occurs when the quantity demanded exceeds the quantity supplied at a given price.
Verified step by step guidance1
Step 1: Understand the concept of scarcity. Scarcity refers to the fundamental economic problem that resources are limited while human wants are unlimited. This means that scarcity is a permanent condition because resources are always finite.
Step 2: Understand the concept of shortage. A shortage occurs when, at a given price, the quantity demanded of a good or service exceeds the quantity supplied. This is typically a temporary situation that can be resolved by changes in price or production.
Step 3: Compare scarcity and shortage. Scarcity is about the limited availability of resources in general, affecting all goods and services, while a shortage is a market condition specific to a particular good or service at a specific price point.
Step 4: Recognize that scarcity cannot be eliminated by increasing production because resources are inherently limited, but shortages can be resolved by adjusting prices or increasing supply.
Step 5: Conclude that the best description differentiates scarcity as a permanent, broad economic problem of limited resources, and shortage as a temporary market imbalance where demand exceeds supply at a given price.
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