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Building Blocks in Economics: The Problem of Choice – Class 9 Social Science notes, important questions and MCQs

NCERT Class 9 Social Science, chapter 8. Notes, key terms, important questions with answers and MCQs.

Chapter overview

Human wants are unlimited, but the resources to satisfy them are limited. This scarcity forces individuals, firms and governments to make choices. Every choice has an opportunity cost, the value of the next best alternative given up. Economics studies how societies decide what to produce, how to produce and for whom to produce.

Wants, resources and scarcity

Wants are unlimited and keep growing; resources such as land, labour, capital and time are limited.
Scarcity means resources are not enough to satisfy all wants.
Because of scarcity, we must choose which wants to satisfy first.

Opportunity cost

Opportunity cost is the value of the next best alternative given up when a choice is made.
For example, if a farmer uses a field for rice, the opportunity cost is the wheat that could have been grown there.
Thinking about opportunity cost helps people make better decisions.

Central problems of an economy

What to produce and in what quantity.
How to produce: which technique, labour-intensive or capital-intensive.
For whom to produce: how goods and income are distributed among people.
Goods may be free goods (air) or economic goods (food, books) that have a price because they are scarce.

Key terms

Scarcity: a situation where resources are not enough to satisfy all wants
Opportunity cost: the value of the next best alternative given up when making a choice
Economic good: a good that is scarce and has a price
Free good: a good available in plenty without cost, such as air
Factors of production: resources used to produce goods: land, labour, capital and entrepreneurship

Important questions with answers

What is opportunity cost? Give an example.2 marks

Opportunity cost is the value of the next best alternative given up when a choice is made. For example, if a student spends two hours playing a game instead of studying, the opportunity cost is the learning they could have done in those two hours.

Why is scarcity called the root of all economic problems?3 marks

Human wants are unlimited, but resources such as land, labour, capital and time are limited. Because resources cannot satisfy all wants, people, firms and governments must choose how to use them. This need to choose gives rise to the central economic problems of what, how and for whom to produce.

Explain the problem of choice, opportunity cost and the central problems of an economy.5 marks

Every individual and society faces the problem of choice because human wants are unlimited while resources such as land, labour, capital, money and time are limited. This condition is called scarcity. Since all wants cannot be satisfied, people must decide which wants to satisfy and which to give up. Every choice involves an opportunity cost, which is the value of the next best alternative given up. For example, if a government spends money on building a highway, the opportunity cost may be the hospitals that could have been built with the same money. Understanding opportunity cost helps people make wise decisions. Because of scarcity every economy must solve three central problems. The first is what to produce and in what quantities, such as food grains or weapons, consumer goods or machines. The second is how to produce, that is, which technique to use: labour-intensive methods that create more jobs or capital-intensive methods that use more machines. The third is for whom to produce, that is, how the goods and income are distributed among different people. Different economies solve these problems through markets, government planning or a mix of both.

Quick revision

Unlimited wants, limited resources = scarcity.
Scarcity forces choice.
Opportunity cost = next best alternative given up.
Central problems: what, how, for whom.

Exam tips

Always define opportunity cost with your own example from daily life.
Remember the three central problems as What, How and For whom.

Practice MCQs

The basic economic problem arises because of
1. scarcity of resources
2. unlimited resources
3. too few wants
4. excess money
Show answer
Answer: (a) scarcity of resources. Wants exceed resources.
Human wants are
1. limited
2. fixed
3. unlimited
4. unchanging
Show answer
Answer: (c) unlimited. New wants keep arising.
Which of these is a free good
1. rice
2. books
3. air
4. mobile phones
Show answer
Answer: (c) air. It is available in plenty without cost.
The value of the next best alternative given up is called
1. profit
2. income
3. price
4. opportunity cost
Show answer
Answer: (d) opportunity cost. Every choice has one.
Deciding whether to use more machines or more workers is the problem of
1. how to produce
2. what to produce
3. for whom to produce
4. when to consume
Show answer
Answer: (a) how to produce. It concerns the technique of production.
Deciding how goods are distributed among people is the problem of
1. what to produce
2. for whom to produce
3. how to produce
4. how much to save
Show answer
Answer: (b) for whom to produce. It concerns distribution.
Riya has one evening and chooses to study instead of watching a film or playing football. If she would have preferred the film to football, her opportunity cost is
1. playing football
2. watching the film
3. studying
4. nothing
Show answer
Answer: (b) watching the film. Only the next best alternative counts.
Why do even rich countries face the problem of choice
1. they have unlimited resources
2. their resources are still limited compared to wants
3. they have no wants
4. they do not produce anything
Show answer
Answer: (b) their resources are still limited compared to wants. Scarcity is universal.

All chapters of Class 9 Social Science

Written by Kundali IQ from standard, well-established facts to help with revision. This is not an official NCERT publication; always read your textbook too.