The fundamental economic problem is scarcity and that it results from limited resources and unlimited wants
Scarcity exists because resources — the things used to produce goods and services — are finite. At the same time, human wants never run out, so there is never enough to satisfy everyone.
Formula
Scarcity = Limited Resources + Unlimited Wants
Real World
During the 2021 global semiconductor shortage, carmakers like Ford had factories idling and cut production of hundreds of thousands of vehicles — a textbook case of limited capital resources constraining output despite surging consumer demand.
Exam Focus
Always link scarcity to both sides of the equation: finite factors of production AND unlimited wants — one side alone scores half marks.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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