Basic Economic Problem

Basic Economic Problem :-

Basic Economic Problem faced by every economy,  is  a problem of choice, which involves satisfaction of unlimited wants of human beings, for which  limited resources which can satisfy these wants are available and such limited resources have alternative uses.

Human wants are unlimited and are never ending. As the means or resources to satisfy such wants are limited, all such human wants cannot be fulfilled. Due to this, the  human beings   want to maximize satisfaction achieved by utilisation of such resources. For achieving maximize satisfaction, every consumer exercises choices , one,  relating to which the goods should be consumed,  and second, in what quantity should each of these goods be consumed.

Economic problem is a problem of choice.

Reasons forBasic Economic Problem   :-

The  main reasons for existence of economic problems are as under :-

(i) Scarcity of resources : –

Resources like land, labour, capital etc are limited (scarce) in relation to their demand . Due to such limited availability, an economy is unable to produce enough to meet all the wants of people. If there were no scarcity, there would not have been no problem of resources and all the demands could have been met.

(ii) Unlimited Human wants:-

Human wants are never ending, unlimited   and can never be fully satisfied. Once a particular   want is satisfied, another new want emerges.

Different Human wants   also differ between themselves in terms of importance. While   some wants are more important , and need to be satisfied before   other wants, some wants can be deferred.  This requires the   people to allocate their resources in order of preference, to satisfy some of their wants. Had all the human wants  been of equal importance,   it would have been impossible to make choices.

(iii) Alternate Uses :-

In addition to being scarce, the resources also have alternate uses, i.e,  a resource can be put to more than one use, For example : We all know, diesel is both scarce in relation to its demand, as well as it can be used for vehicles, railway engines, airplanes, generators etc. As a result, the economy has to make choice between the alternative uses of the given resources.