An economy has many workers who have no work, and some of its factories are lying idle. Does this economy face scarcity of resources?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Yes, because even with all its resources in use, it could not produce all that people want.
Scarcity means that resources are limited compared with what people want. Idle workers and factories do not change this: even fully used, the resources would fall short of people’s wants.
Option (1) No, because idle workers show that the economy has more resources than it needs. — Incorrect. Idle resources show that they are underemployed, not that they are more than people’s wants.
Option (2) No, because scarcity arises when all the resources are fully utilised. — Incorrect. Scarcity is about resources being limited compared with wants. It is there whether resources are fully used or not.
Option (3) Yes, because the idle workers and factories are what cause scarcity. — Incorrect. Idle resources put the economy below its production possibility frontier. They are not the cause of scarcity.
Option (4) Yes, because even with all its resources in use, it could not produce all that people want. — Correct. Resources are scarce in comparison to wants.
Scarcity and underemployment are different ideas. Scarcity compares resources with wants; underemployment means some of the resources are not being used.
NCERT (2026-27): “1.1 A Simple Economy … Just as the resources of an individual are scarce, the resources of the society are also scarce in comparison to what the people in the society might collectively want to have. The scarce resources of the society have to be allocated properly in the production of different goods and services in keeping with the likes and dislikes of the people of the society.” “The production possibility frontier gives the combinations of corn and cotton that can be produced when the resources of the economy are fully utilised. Note that a point lying strictly below the production possibility frontier represents a combination of corn and cotton that will be produced when all or some of the resources are either underemployed or are utilised in a wasteful fashion.” |