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Q. Scarcity means we all have to make choices?
Ans. It refers to the situation when what you have is less than what you wish to
have. In other words ―scarcity‖ implies a situaƟon when supply of resources is
less than the demand for resources. Due to the existence of limited resources
and unlimited wants, the scarcity automatically comes into picture. In short
scarcity is function of limited resources and unlimited wants. Economic
resources are predominantly scarce in nature with divergent types like land,
labour, capital and entrepreneurship. In presence of limited economic resources
with alternative uses every economy has to face the problems like what to
produce, how to produce, for whom to produce and how to achieve economic
growth and development .Because of scarcity, choices have to be made by
consumers, businesses and governments. For example, over six million people
travel into London each day and they make choices about when to travel,
whether to use the bus, the tube, to walk or cycle – or whether to work for
whom.
Q. Explain production possibility curve with the help of diagram?
Ans.A production possibility curve shows all the possible combinations of two
goods that a society can produce within a specified time period when the
resources are fully (efficiently) utilised. In other words, production possibility
curve is the locus of all combinations of two goods that can be produced with
the given resources. PPC is also known as Production Possibility Frontier (PPF)
because it shows limit of what is possible to produce. Along a PPC if we want to
increase the production of one commodity then we have to reduce the
production of another commodity. This is why Production possibility Curve is
also known as transformation curve. Choices (alternatives) can be explained with
the help of a production possibility curve. Production possibility curve is also
called opportunity cost curve because slope of the curve at each and every point
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