ACCA Advanced Performance Management (APM) Practice Exam

The definition of economic scarcity applies universally across all economies, regardless of their wealth or development status. Scarcity arises because resources are limited while human wants and needs are virtually unlimited. This fundamental economic problem exists in both rich and poor nations, highlighting that every economy must allocate its limited resources in the most efficient way possible to satisfy the competing needs of its population.

This condition affects decision-making processes at all levels, from individual consumers to governments. In situations of scarcity, choices must be made about what to produce, how to produce, and for whom to produce, as there will never be enough resources to meet all demands fully.

The other options inaccurately narrow the scope of scarcity. Claiming that it only affects poor nations overlooks the reality that wealthy nations also face resource limitations. Similarly, stating that scarcity is confined to rich nations disregards the ongoing resource challenges experienced by developing countries. Lastly, defining scarcity solely in terms of products in short supply fails to capture the broader economic implications of resource limitations that encompass all types of goods and services.