The economic problem is a fundamental issue in economics that arises due to the scarcity of resources and unlimited human wants. It refers to the problem in the economy that is concerned with the production of goods and services that satisfy the wants of the economy. The main causes of economic problems are the scarcity of resources and unlimited human wants. The economic problem can be explained by the following key points:
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Scarcity of Resources: Resources such as land, labor, and capital are limited in relation to their demand, and the economy cannot produce all that people require to satisfy themselves. This is the fundamental cause of the existence of economic problems in all economies.
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Unlimited Human Wants: Human wants are unlimited, but the means to satisfy these wants are limited. Therefore, all the wants cannot be fulfilled, and the economy has to choose among different options of goods and services.
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Production of Goods and Services: The economy has to allocate resources and choose from different options of goods, choose from different production techniques, and decide the end consumer of the goods.
The three central problems of an economy are:
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What to Produce?: With limited resources, an economy cannot produce all goods and services. Therefore, the first central problem of an economy includes selecting goods and services to produce and the number of units or quantity of each commodity to be produced.
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How to Produce?: An economy has to choose from different production techniques to produce goods and services.
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For Whom to Produce?: As an economy cannot satisfy the needs and wants of every individual of the society, it has to make a decision for who to produce a commodity and service.
In conclusion, the economic problem is a fundamental issue in economics that arises due to the scarcity of resources and unlimited human wants. The economy has to allocate resources and choose from different options of goods and services to produce, choose from different production techniques, and decide the end consumer of the goods.
