Question

How is an economic problem a choice making activity?

Answer 1

Since we are living in a world of scarcity, a society can produce only a small portion of goods and services that its people want. Therefore, scarcity of resources gives rise to the fundamental economic problem of choice. As a society cannot produce enough goods and services to satisfy all the wants of its people, it has to make choices.

A decision to produce one good requires a decision to produce less of some other good. So choice involves sacrifice. Thus every society is faced with the basic problem of deciding what it is willing to sacrifice to produce the goods it wants the most.

For instance, the more roads a country decided to construct the fever resources will there be for building schools. So the problem of choice arises when there are alternative ways of producing other goods. The sacrifice of the alternative (school buildings) in the production of a good (roads) is called the opportunity cost.

There are a number of problems that can arise from choices that are made by people, whether they are individuals, firms or government. Choices or alternatives (or opportunity cost) are illustrated in terms of a production possibility curve.

hope this will help.