(a) Why is scarcity a fundamental problem in Economics? [6 marks] (b) Give a reason
(a) Why is scarcity a fundamental problem in Economics? [6 marks]
(b) Give a reason on why Economics is a (i) science; (ii) social science [3 marks each]
(c) How do governments solve the problem of scarcity? [8 marks
Explanation
(a) Economics seeks to study the relationship between ends and means Ends are unlimited while the means are Limited Scarcity means resources are limited in relation to the ends, Economics is therefore concerned with allocating the limited resources among the competing and unlimited wants
(b)(i) Economics is a science because it adopts the scientific method
The scientific method involves the following
(a) Observation (b) Formulating a hypothesis
(c) Collecting data (d) Organizing/analyzing the data
(e) Formulating laws (f) Testing the laws
(g) Prediction on the basis of the laws
(ii) Economics is a social science because it studies human behaviour
e.g If the price of a commodity rises, people will buy less. other things equal.
(c) Governments are faced with the problem of allocating scarce resources among competing unlimited wants. In doing this, government draw a scale of preference which help them to choose or select the most important want to be satisfied In making choices, you forgo some other wants. The forgone wants are the opportunity cost or real cost of the selected alternative