The document discusses the economic problem of scarcity. It explains that scarcity exists because resources are limited while wants are unlimited. Every economy, regardless of its type, faces scarcity and must decide how to allocate limited resources among competing uses. The document also introduces the production possibilities frontier to illustrate scarcity and opportunity cost. It outlines several problems faced by economies, including what and how much to produce, how to utilize resources fully and efficiently, and how to achieve economic growth.

1. XI Economics
Chapter 3

2.  Economic Problem:
 Scarcity is the fundamental problem of every society
 Reason: None of us can have all that we want
 Limited amount of human and non-human
resources
 It’s not possible for any economy to produce every
type of good in an unlimited quantity
 Hence, every economy has to take the basic decision
of making best use of its available resources in
producing goods and services.
 The Law of Scarcity

3.  UnlimitedWants
 Multiply over time
 Many wants recurring
 Wants differ in their urgency
 Limited Resources
 Productive resources – scarce
 Labour – by size of population
 Land – by area of the country
 Capital & technology – scarcity of various inputs
 Alternative Uses of Resources

4.  The available resources should be
allocated among different uses in
such a way that resources are put to
their best possible use.
 What is true of an individual is also
true of an economy. Every economy,
 Capitalist or socialist
 Developed or underdeveloped

5.  What to produce and how much to
produce?
 How to produce?
 For whom to produce?
 Problems of fuller utilization of
resources.
 Problem of efficiency in utilization of
resources.
 Problem of economic growth

6. Possibilities Butter
(Million kg)
Guns
(Thousands)
Marginal Opp.
Cost of Butter
(Thousand of
Guns)
A 0 15 -
B 1 14 1
C 2 12 2
D 3 9 3
E 4 5 4
F 5 0 5

13. The amount of resources is
fixed
Unchanged techniques
Full employment of resources
Resources are not equally
efficient in the production of all
commodities

14. It slopes downwards
to right
It is concave from the
origin

15. Problem of Scarcity
Problem of Choice
Problem ofWhat to Produce
Problem of Full and Efficient
utilization of the resources
Problem of Economic Growth

16.  It is generally defined as the process
whereby real per capita income of a
country increases over a long period of
time
 Focus three things,
1. Rise in PCI
2. Rise in PCI in real terms
3. Long period

17.  Traditionally, economic development
has been defined as a sustained increase
in real per capita income. (1960s and
1970s)
 The process whereby the real PCI of a
country increases over a long period of
time, along with reduction of poverty,
inequality and unemployment.

18. Growth Development
Narrow Concept Comprehensive
More O/P Composition of O/P,
Allocation of Resources
Rise in Income Also reduction of
poverty, inequality of
income and employment
Defined strictly in terms
of economic indicator,
i.e., income
But also, non-economic
indicators like literacy,
health services, etc.

19. Growth Development
Quantitative Also Qualitative
Easier to realise More extensive. Involves
a whole lot of changes in
the society
Developed countries Developing countries
Less government
intervention required
Demands active
involvement of the
government

20.  Prof.W.W. Rostow
1. Traditional Society
2. Pre-take off stage
3. Take-off stage
4. Drive to Maturity
5. The age of high mass-
consumption

21.  Absence of modern science and
technology
 Low output and productivity
 Primitive methods of production
 Sufficient to meet the basic
consumption needs
 No saving or investment
 Agriculture is the mainstay

22.  Transitional era – pre-conditions for
sustained growth are created
 Aspiring for a higher standard of living
 Changes occur in values, social attitude
and expectations
 Education and entrepreneurship spreads
 Technological revolution in agriculture
 Expansion of trade (internal & external)

23.  Process of economic growth starts
which becomes self sustained (without
govt. action)
 Initiated by a sharp stimulus
 Large increase in the rate of saving and
investment – high rate of growth of o/p
 Essential part – development of one or
more leading sectors in the economy.

24.  Goal of high level of per capita o/p
 Period of high, long sustained
economic growth
 Effective application of modern
technology in all the sectors
 Rate of investment is well high over
10 % of national income

25.  Final stage of economic growth
 PCI becomes very high, leading to high
standard of living
 Extensive use of durable consumers’
goods and household gadgets
 Balance of attention of the society is
shifted from problems of production to
problems of consumption.