1) What are shortages? 2) What is scarcity? 3) What are choices? 4) What are opportunity costs? 5) What are wants? 6) What are needs? 7) What are the forms of capital? 8) What is mean Production Possibility Curve (PPC)? 9) What are the types of Economic Systems?

1. In the free market, demand and supply of goods and services intersect to determine the optimal price and quantity. When the demand for a commodity exceeds its supply it will create a situation of shortage of supply in the economy. On the other hand, when supply is more than the demand it will also lead to a shortage of demand in the economy. The shortage may arise as a result of price ceiling by the government of the country.

2. The wants of the people are unlimited but the means or resources to fulfill it are limited in an economy which leads to the scarcity. Scarcity leads to the problem choice so that the need and wants of all are met in an economy.

3. In economics, choices refer to the selection of the number of goods to be produced or consumed due to a scarcity of resources. For instance, when a country is using its scarce resources for the defense, it cannot use the same resources for health and education. It means there is an opportunity cost which means the country has to sacrifice on the health and education of the people for the defense purpose.

4. Opportunity cost refers to the cost which an individual has to bear for choosing the next best alternative. It means to consume one more unit of a commodity, one must sacrifice some unit of other commodities.

5. Wants are the desire or motives of individuals to consume a certain good, services or leisure activity. Wants of humans are unlimited whereas the resources are limited.

6. Needs are the basic requirement of humans that are to be fulfilled for survival. Needs of humans are limited as it is a necessity to them. For instance, food, shelter, education, health, and so on.

7. The three forms of capital are as follows:

(a) Physical capital: It refers to the tangible goods or assets which help in the production process such as machines, tools, and so on.

(b)Human capital: It is the intangible assets which include the knowledge base of the humans.

(c)Financial capital: It refers to the funds required by the organization to run the business.

8. Production possibility curve shows the combination of two goods which an economy can produce with the given technology and resources. It shows the point at which the economy is producing most efficiently with optimum utilization of resources. It assumes the technology and infrastructure to be constant.

9. There are mainly three types of the economy-

(a)Socialist economy: Under such an economy, the process of production and distribution is controlled by the government of the country.

(b)Capitalist economy: Under such an economy, the production and distribution of goods and services are under private ownership.

(c) Mixed economy: It is a combination of a socialist and capitalist economy where both the private firm and the government co-exist. Free market system prevails in the economy and the government intervene only to correct the fluctuation or disequilibrium.