EconomicsICSE Class 9 · Problems of an Economy

Resources, Scarcity and the Basic Economic Problem (ICSE Class 9 Economics)

Updated 18 October 2026 · Fact-checked

Resources are anything that can be used to produce goods and services or satisfy wants: natural (renewable or non-renewable), human and capital (man-made). Resources are limited, or scarce, when their supply is less than the demand for them. The basic economic problem is the problem of choice that arises because wants are unlimited, resources are limited and resources have alternative uses; the next best use given up is the opportunity cost.

Wants are unlimited but resources are limited and have other uses, so we must choose, and the best option given up is the opportunity cost.

Illustration drawn for QuestionBuddy.

Understand Resources, Scarcity and the Basic Economic Problem with Opportunity Cost

Types of resources.
1. Natural resources: gifts of nature, namely land, water, forests, minerals, sunlight and wind. Renewable ones are replaced naturally over time (forests, water, solar energy); non-renewable ones have a limited stock that cannot be replaced in human time (coal, petroleum, iron ore).
2. Human resources: people with their physical effort, skill, knowledge and health (farmers, engineers, teachers, doctors).
3. Capital (man-made) resources: things made by people to help further production (machines, tools, buildings, roads, dams, computers).
In production terms these appear as land, labour and entrepreneur, and capital.

Limited resources (scarcity). Resources are limited when their supply is less than the total demand for them, so not every want can be satisfied. Scarcity is relative: it compares what is available with what is wanted. Examples: land (fixed in area but wanted for farming, housing, factories and roads), water in a town, a family's money, a student's 24 hours of time, and fossil fuels that are being used up. Even rich countries face scarcity because their wants grow as incomes grow.

The basic economic problem. The problem of choice that arises from three facts:
1. Wants are unlimited; as one is satisfied another arises, and wants recur.
2. Resources are limited.
3. Resources have alternative uses (a plot can grow wheat or vegetables or hold a school; Rs 1,000 can buy books or a bat).
So every person, firm and government must choose which wants to satisfy and how to allocate resources. If resources had only one use, or were unlimited, there would be no problem of choice.

Opportunity cost. When a resource is used for one purpose, the next best alternative given up is its opportunity cost. A farmer who grows wheat on a plot that could have grown vegetables gives up the vegetables; their value is the opportunity cost of the wheat.

Neighbouring topics: efficient use of resources and the three central problems are on the next page of this chapter.

Resources, Scarcity and the Basic Economic Problem with Opportunity Cost: key facts

Resource types: Natural (renewable, non-renewable)
human
capital (man-made); Land, labour, capital in production terms.
Basic economic problem: Unlimited wants + limited resources + alternative uses = problem of choice; All three are needed.
Scarcity: Scarce when supply is less than demand | relative, not absolute; Shortfall percentage is the shortfall divided by demand, times 100.
Opportunity cost: Value of the next best alternative given up | when a resource is used for one purpose; Choice always has a cost.

Resources, Scarcity and the Basic Economic Problem with Opportunity Cost in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

A farmer's plot

Suppose a farmer can earn Rs 60,000 by growing wheat on his five acres, Rs 80,000 by growing vegetables, or Rs 50,000 by renting it to a school trust.

If he grows wheat, what is the opportunity cost? If he grows vegetables, what is it?

Try it first, then show the solutionSolution

The opportunity cost is the next best alternative given up.
Choosing wheat gives up the best alternative, vegetables worth Rs 80,000.
Choosing vegetables gives up wheat, worth Rs 60,000 (the school rent is lower than that in this example).

Answer: Opportunity cost of wheat is Rs 80,000 of vegetables; of vegetables is Rs 60,000 of wheat.

Memory hook: What you give up is the cost.

Tricks to remember Resources, Scarcity and the Basic Economic Problem with Opportunity Cost

Short memory aids. Say each one aloud once, then use it on a question the same day.

U-L-A
Unlimited wants, Limited resources, Alternative uses: the three facts of the economic problem.
Use it when: Basic problem.
Natural, Human, Made
Resources are natural, human or man-made.
Use it when: Types.
Renewable regrows
Forests and water renew; coal and petroleum do not.
Use it when: Natural resources.

Resources, Scarcity and the Basic Economic Problem with Opportunity Cost: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Type of resource · 1 mark · MCQBoard level

Coal is a:
(a) renewable natural resource (b) non-renewable natural resource (c) human resource (d) capital resource

Try it first, then show the solutionSolution

Coal is a gift of nature with a limited stock that cannot be replaced in human time.

Answer: (b) non-renewable natural resource

Example 2: Classify the resources · 3 marks · Short answerHarder board level

Classify as natural (renewable or non-renewable), human or capital: (i) solar energy; (ii) a lathe machine; (iii) an engineer; (iv) petroleum.

Try it first, then show the solutionSolution

(i) Natural, renewable. (1 mark)
(ii) Capital (man-made). (1 mark)
(iii) Human. (iv) Natural, non-renewable. (1 mark)

Answer: (i) natural, renewable (ii) capital (iii) human (iv) natural, non-renewable

Example 3: Measuring scarcity · 3 marks · Short answerHarder board level

A town needs 12 lakh litres of water a day but its reservoir can supply only 9 lakh litres. Find the shortfall and the shortfall as a percentage of the need. What does it show?

Try it first, then show the solutionSolution

Shortfall = 12 - 9 = 3 lakh litres. (1 mark)
Percentage = 3 / 12 x 100 = 25 per cent. (1 mark)
Supply is less than the demand, so water is scarce for the town; scarcity compares supply with wants. (1 mark)

Answer: 3 lakh litres, 25 per cent of the need; water is scarce.

Example 4: Case study: choosing a use for land · 4 marks · Case-basedHOTS / competency

A farmer has five acres and three options: wheat (income Rs 60,000), vegetables (income Rs 80,000) or renting the land to a school trust (income Rs 50,000).
(i) Which use gives the highest income? (1)
(ii) What is the opportunity cost if he chooses wheat? (1)
(iii) Which fact of the basic economic problem does the example show? (2)

Try it first, then show the solutionSolution

(i) Vegetables, with Rs 80,000.
(ii) The next best alternative, vegetables worth Rs 80,000.
(iii) Alternative uses of a limited resource (the land can be used in three ways), which forces a choice.

Answer: (i) vegetables (ii) Rs 80,000 of vegetables (iii) alternative uses

Example 5: Renewable and non-renewable resources · 3 marks · Short answerHarder board level

Distinguish between renewable and non-renewable natural resources with two examples each, and say why the second group needs more careful use.

Try it first, then show the solutionSolution

Renewable resources are replaced naturally over time, for example forests and solar energy. (1 mark)
Non-renewable resources have a limited stock that cannot be replaced in human time, for example coal and petroleum. (1 mark)
Once used up, non-renewable resources are gone, so they must be used carefully for future generations. (1 mark)

Answer: Renewable: forests, solar energy. Non-renewable: coal, petroleum; they need care because they cannot be replaced.

Where students lose marks in Resources, Scarcity and the Basic Economic Problem with Opportunity Cost

The slips examiners see most often, and what to write instead.

Mistake: Thinking scarcity means poverty
Scarcity is understood as shortage in poor countries only.
Wrong working
Only poor countries face scarcity
Right working
All countries face scarcity because resources are limited compared with wants
Do this: Scarcity is relative.
Usually costs: 1 mark
Mistake: Missing the third fact
Only wants and resources are mentioned.
Wrong working
Basic problem: unlimited wants
Right working
Unlimited wants, limited resources and alternative uses
Do this: Name all three facts.
Usually costs: 1 mark
Mistake: Wrong opportunity cost
The chosen option is given as the cost.
Wrong working
Opportunity cost of wheat is wheat
Right working
Opportunity cost of wheat is the next best alternative given up
Do this: It is what you give up.
Usually costs: 1 mark

Exam tips

Classify a resource in two steps: natural, human or capital, then renewable or not.
Always add an example to scarcity answers.
Mention alternative uses in every answer on the basic economic problem.
Write opportunity cost as the next best alternative given up.

Practice questions on Resources, Scarcity and the Basic Economic Problem with Opportunity Cost

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
A tractor is an example of:
(a) a natural resource (b) a human resource (c) a capital resource (d) a free good
Hint
Man-made aid to production.
Answer
(c) a capital resource
Q2 · 2 marks · Very short answerBoard level
What is meant by resources? Give two examples.
Hint
Anything used to produce.
Answer
Resources are anything that can be used to produce goods and services or to satisfy wants, for example land and machines.
Q3 · 3 marks · Short answerHarder board level
Rs 1,200 can buy one cricket bat or four books costing Rs 300 each. If a student buys the bat, what is the opportunity cost?
Hint
Next best alternative given up.
Answer
Four books worth Rs 300 each (Rs 1,200) are given up; they are the opportunity cost of the bat.
Q4 · 3 marks · Short answerHarder board level
Explain how the three facts, unlimited wants, limited resources and alternative uses, give rise to the basic economic problem.
Hint
Each fact adds a part.
Answer
Wants are unlimited, resources are limited, so not all wants can be satisfied; and since the resources can be used in different ways, the economy must choose which wants to satisfy. This problem of choice is the basic economic problem.
Q5 · 3 marks · Short answerHOTS / competency
"A billionaire also faces scarcity." Explain with a resource other than money.
Hint
Think of the 24 hours of a day.
Answer
Time is a scarce resource for everyone, rich or poor: a day has only 24 hours and must be shared among work, rest and leisure. Because wants (what the person wishes to do) exceed the available time, even a billionaire must choose.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.Name the three types of resources.Show answer
Natural, human and capital.
2.Give a non-renewable resource.Show answer
Coal or petroleum.
3.Is scarcity absolute or relative?Show answer
Relative.
4.What is opportunity cost?Show answer
The next best alternative given up.
5.Why is there a problem of choice?Show answer
Wants are unlimited, resources are limited and have alternative uses.
6.Is time a resource?Show answer
Yes, a scarce one.

Resources, Scarcity and the Basic Economic Problem with Opportunity Cost: frequently asked questions

Is a resource that is rare always scarce?

Scarcity compares supply with demand, so a common resource can still be scarce if wanted by many.

What if resources had only one use?

There would be nothing to choose between and no allocation problem.

Is the money in your pocket a resource?

Yes, it is a limited resource that has alternative uses.