Reading Passage
In a small town, a family earned income from a bakery and a vegetable garden. The parents had limited money, time, land and labour, but their wants were many. They wanted to repair the oven, buy books for their children, improve the garden and save for medical care. Since they could not satisfy every want at once, they ranked their needs and selected the most important ones. This situation showed the connection between scarcity and unlimited wants: resources were limited, while their desires continued to grow. The family also faced opportunity cost. When the parents spent money on repairing the oven, they had to postpone buying new garden tools. The value of the postponed choice was the opportunity cost of the repair. They made decisions at the margin as well. After selling more bread than usual, they considered whether the extra income would produce greater benefit if used for flour or for a small improvement to the oven. Their decision depended on the additional benefit and additional cost. An incentive also influenced their work. The parents promised their daughter a new schoolbag if she helped record daily sales carefully. She worked more attentively because of the reward. The bakery exchanged bread for vegetables from another household, and both families benefited from trade. The town's market connected households and firms: households supplied labour and purchased goods, while firms paid wages and supplied goods and services. Some activities, such as public health and law and order, required government support. The town therefore combined private enterprise with public control. This arrangement reflected a mixed economic system. Through careful selection, exchange and cooperation, the families tried to use scarce resources for greater welfare.
Multiple-Choice Questions
(a) Resources were unlimited(b) Resources were scarce(c) Trade had stopped(d) Prices were fixed
(a) Buying flour(b) Selling bread(c) Buying garden tools(d) Paying wages
(a) Marginal thinking(b) Central planning(c) Inflation(d) Private property
(a) She received an incentive(b) She owned the market(c) She avoided trade(d) She had unlimited time
(a) Pure socialist(b) Pure capitalist(c) Mixed(d) Command only
Short Questions
Thinking Questions
Word Meanings
✅ Show answers (click)
Multiple-choice: 1. (b) Resources were scarce. 2. (c) Buying garden tools. 3. (a) Marginal thinking. 4. (a) She received an incentive. 5. (c) Mixed.
Short answers: 6. The family had limited money, time, land and labour, while its wants were many. 7. It was the value of the postponed choice, buying new garden tools, when money was spent on repairing the oven. 8. The bakery exchanged bread for vegetables, so both households benefited. 9. Households supplied labour and purchased goods; firms paid wages and supplied goods and services. 10. Public health and law and order required government support.
Thinking answers: 11. The family ranked its wants, selected the most important needs, compared additional benefit with additional cost, and postponed less urgent choices. 12. Private families and the bakery conducted production, exchange and consumption, while the government supported public health and law and order; therefore private activity and public control existed together.
Word meanings: 13. Scarce means limited in relation to wants. 14. Incentive means a reward or encouragement that influences action. 15. Welfare means human well-being or benefit.