Why is it necessary to use decision-making skills when you have limited resources?

• A. Because limited means eliminate the need for prioritizing choices.
• B. Because unlimited resources make all choices equally beneficial.
• C. Because scarcity forces individuals to choose how to allocate their resources among competing wants.
• D. Because decision-making skills are only needed when resources are abundant.

Answer: (C)

Verified step by step guidance

1. Understand the concept of scarcity: In microeconomics, scarcity means that resources are limited while human wants are unlimited. This fundamental problem forces individuals and societies to make choices about how to allocate resources efficiently.
2. Recognize the role of decision-making skills: Because resources are limited, individuals must prioritize their wants and needs. Decision-making skills help in evaluating the trade-offs and opportunity costs associated with different choices.
3. Define opportunity cost: Opportunity cost is the value of the next best alternative foregone when a choice is made. Understanding this concept is crucial for making informed decisions under scarcity.
4. Explain why unlimited resources would change the scenario: If resources were unlimited, there would be no need to prioritize or make trade-offs, as all wants could be satisfied simultaneously. However, this is not the case in reality.
5. Conclude that scarcity necessitates decision-making: Since scarcity forces individuals to allocate limited resources among competing wants, decision-making skills are essential to determine the most beneficial and efficient use of those resources.