Introduction to Economics - Study Material

STORY TIME

(In this narrative, a father is giving his daughter (Sara) a sum of Rs.1000 as a reward for her good grades. He presents her with various options to spend the money, emphasizing the concept of limited resources and careful selection of options .)

Father: Well done, Sara. I am proud of your achievements.

Sara: Thank you, Dad! Do I get a reward?

Father: Yes, here is Rs.1000 for your hard work.

Sara: That's great! Thanks, Dad.

Father: So, Sara, how do you plan to use this money?

Sara: I haven't decided yet.

Father: You have several options, such as:

1. You can buy a new book.
2. You can go for a day out with your friends.
3. You can buy a new dress.
4. You can save it for future use.

Sara: These are all tempting options. Can I choose more than one?

Father: Yes, but remember, you can't choose all of them as you only have Rs.1000.

Sara: Why is that?

Father: Because your resources, in this case, money, are limited.

Sara: That's a bit disappointing.

Father: It's not just you, Sara. This dilemma is faced by everyone, even nations.

Sara: Why is there always a shortage of resources?

Father: Resources are used to produce goods and services that we desire, hence, they are scarce.

Sara: How can we solve this scarcity problem?

Father: Scarcity is a universal issue that cannot be solved, only managed.

Sara: How can we manage it then?

Father: We need to use our resources efficiently to fulfill our unlimited wants.

KEY CONCEPTS

(1) SCARCITY

• Scarcity is the fundamental economic problem where resources are limited to meet unlimited wants.
• Scarcity can only be managed, not solved.

(2) ALTERNATIVE USE OF RESOURCES

• Resources can be used in multiple ways, creating a need for decision-making.
• Eg. A business owner deciding whether to invest in new machinery or employee training.

(3) ECONOMICS

Economics deals with the optimal use of scarce resources to satisfy unlimited wants.

(4) ECONOMIC PROBLEM

• The economic problem is the issue of allocating and optimally using scarce resources.
• It arises due to limited resources and their alternative uses.

PRACTICE TIME