Answer to Question #205609 in Macroeconomics for Allen

Question

What is a good explanation for why resource scarcity is a problem that modern economies handle fairly well while environmental issues are not?

(1) Economies are able to respond to resource scarcity using principles from Malthusian Theory.

(2) Modern economies do not actually handle resource scarcity very well.

(3) Economic incentives to deal with environmental issues are not as clear as incentives to deal with resources scarcity.

(4) Economies are equally able to deal with changes in resource scarcity and environmental issues because both require government intervention.

(5) None of these are good explanations for the difference.

Answer 1

Resource scarcity happens when the demand for natural resource is higher than the supplies for that given resource.

The correct solution for the question is option 3.

The Economic incentives to handle the resource scarcity is much clear and detailed as compared to the incentives handling environmental issues.