Economic problem arises because of scarcity of resources in relation to demand for them.
(i) Wants are unlimited:
(a) This is a basic fact of human life. Human wants are unlimited.
(b) They are not only unlimited but also grow and multiply very fast.
(ii) Resources are limited:
(a) The resources to produce goods and services to satisfy human wants are available in limited quantities. Land, labour, capital and entrepreneurship are the basic scarce resources.
(b) These resources are available in limited quantities in every economy, big or small, developed or underdeveloped, rich or poor. Some economies may have more of one or two resources but not all the resources.
(c) For example, Indian economy has relatively more labour but less capital and land. The U.S. economy has relatively more land but less labour. No economy in the world is comfortable in all the resources.
(iii) Resources have alternative uses:
(a) Generally a resource has many alternative uses.
(b) A worker can be employed in a factory, in a school, in a government office, self employed and so on.
(c) Like this, nearly all resources have alternative uses. But the problem is that which resource should be put to which use.

Economic problem arises because of scarcity of resources in relation to demand for them.
(i) Wants are unlimited:
(a) This is a basic fact of human life. Human wants are unlimited.
(b) They are not only unlimited but also grow and multiply very fast.
(ii) Resources are limited:
(a) The resources to produce goods and services to satisfy human wants are available in limited quantities. Land, labour, capital and entrepreneurship are the basic scarce resources.
(b) These resources are available in limited quantities in every economy, big or small, developed or underdeveloped, rich or poor. Some economies may have more of one or two resources but not all the resources.
(c) For example, Indian economy has relatively more labour but less capital and land. The U.S. economy has relatively more land but less labour. No economy in the world is comfortable in all the resources.
(iii) Resources have alternative uses:
(a) Generally a resource has many alternative uses.
(b) A worker can be employed in a factory, in a school, in a government office, self employed and so on.
(c) Like this, nearly all resources have alternative uses. But the problem is that which resource should be put to which use.

Economic problem arises because of scarcity of resources in relation to demand for them.
(i) Wants are unlimited:
(a) This is a basic fact of human life. Human wants are unlimited.
(b) They are not only unlimited but also grow and multiply very fast.
(ii) Resources are limited:
(a) The resources to produce goods and services to satisfy human wants are available in limited quantities. Land, labour, capital and entrepreneurship are the basic scarce resources.
(b) These resources are available in limited quantities in every economy, big or small, developed or underdeveloped, rich or poor. Some economies may have more of one or two resources but not all the resources.
(c) For example, Indian economy has relatively more labour but less capital and land. The U.S. economy has relatively more land but less labour. No economy in the world is comfortable in all the resources.
(iii) Resources have alternative uses:
(a) Generally a resource has many alternative uses.
(b) A worker can be employed in a factory, in a school, in a government office, self employed and so on.
(c) Like this, nearly all resources have alternative uses. But the problem is that which resource should be put to which use.

The Production possibility curve is downward sloping straight line because of constant marginal opportunity cost.

(i) Production possibility curve is a curve which depicts all possible combinations of two goods which can be produced with given resources and technology in an economy.
(ii) PPC is also called opportunity cost curve because each and every point on PPC measures the opportunity cost of one commodity in terms of sacrificing other commodity.
(iii) The rate of this sacrificed commodity is called the Marginal Opportunity Cost of the expanding good.

If the river Kosi causes widespread floods in Bihar, it will lead to destruction of resources in Bihar. This will shift the PPC leftward. Initially PPC is PP. With floods, the PPC will shift to P₁P₁
Value: Analytic

There will be no effect on Production Possibility Frontier (PPF). It is because PPF shows only what a country can potentially produce, and not what it actually produces. Slowdown by reducing demand for exports may ultimately bring down output. Assuming that the country's actual production is somewhere on PPF, Slowdown may result in the country producing at a point somewhere below PPF as shown in the figure at point U.
Value: Analytic

The given statement is refuted. Massive unemployment does not decrease the capacity of economy to produce. So, there will be no shift of PPC. However, due to unutilisation of human resources, economy will operate at some point inside PPC as shown in the adjacent figure at point U.

PPC of the economy will shift to the left from PP to P₁P₁. It happens because the number of possible combinations available with the economy has decreased due to destruction of resources in the economy.

(i) A PPF slopes downward to indicate if an economy chooses to produce more of one commodity, then it would have to reduce the production of another commodity. The concave shape of PPF is due to Increase in MarginalOpportunity Cost.
(ii) Any point on a given PPF presents a production possibility wherein all the available resources in an economy get fully utilised. Any combination located below the given PPF shows an underutilization of available resources. Likewise, any point to the right of the PPF is beyond the available resources.
(iii) By economic growth, we mean that an economy has developed greater capacity to produce larger quantity of goods by acquiring more resources. Graphically, this would be represented by a rightward shift of PPF.

Both Yes and No

Yes, production will take place on PPC, if the given resources are fully and efficiently utilised. In such case, production will take place at any point on the curve AB, like point F. No, production will take place on PPC, if the resources are either underutilised or inefficiently utilised or both. In such case, production will take place on any point below the curve AB, like point H. Any point below the PP curve, thus highlights the problem of unemployment and inefficiency in the economy.

The central problems of an economy are:
(i) What to produce and in what quantity?
(ii) How to produce?
(iii) For whom to produce?

All economies whether developed or developing, have similar central problem because one or more of their resources (land, labour, capital and entrepreneurship) are limited and these resources can be put to alternative uses. The wants of the economies are unlimited. Therefore all economies have to face the basic economic problem of choice (what to produce, how to produce and for whom to produce).

(i) The subject matter of economics includes microeconomics and macroeconomics.
(ii) Microeconomics, studies the behaviour of individual economic units of an economy like households, firms, individual consumers and producers etc. It does not study the economy as a whole.
(iii) Macroeconomics is the part of economic theory that studies the economy as a whole, such as national income,  aggregate employment, general price level, aggregate consumption, aggregate investment, etc.