The correct option is 1 and 3 only.
Explanation
The fundamental problem of an economy revolves around the concept of scarcity. Economics studies how economic agents (individuals and society) allocate limited resources to satisfy unlimited wants. This necessitates choices regarding what to produce, how to produce, and for whom to produce.
Statement 1 is Correct:
Individuals possess limited resources (such as income, time, and assets) relative to their unlimited needs and desires. Since no individual can satisfy all their wants fully, they must make choices to maximize their satisfaction within their constraints.
Statement 2 is Incorrect:
Scarcity is not limited to individuals; it is a universal phenomenon faced by society as a whole. The aggregate resources of a society-land, labor, capital, and entrepreneurship-are finite. Therefore, society cannot produce an unlimited amount of goods and services to meet the total wants of its population.
Statement 3 is Correct:
An economy functions as a mechanism to coordinate the activities of millions of individuals. Compatibility between what people collectively want (demand) and what is produced (supply) is essential. If an economy produces goods that are not required or desired by the society, resources are misallocated, leading to inefficiency.
Key Takeaway:
Scarcity is the central economic problem faced by both individuals and society, requiring the efficient allocation of resources to ensure that production aligns with consumption needs.