Q:

What is the basic economic problem?

A:

Quick Answer

The basic economic problem is scarcity, which is the idea that human beings want more things than are available to them. In other words, there are a limited amount of resources, so people are unable to attain everything they desire. This forces humans to make choices, the study of which is the core of economics.

Know More
What is the basic economic problem?
Credit: Stefka Pavlova Moment Open Getty Images

Full Answer

The relationship between scarcity and choices can be seen in many everyday examples. For instance, when a consumer contemplates a purchase, he must make a choice between buying the object and losing the money spent on it, or not obtaining the object and keeping the money. In either case, something is gained and something is lost. The thing that is lost or foregone when making a choice is known as the opportunity cost, another basic economic concept.

Conversely, if there was no scarcity, there would be no need to make choices that involve opportunity costs. For example, if there was a machine that could produce anything that a person desired, then the only limit to what that person could own would be the person's imagination. It is easy to see that money would not be necessary if such a machine existed, and thus the science of economics would be radically altered and cease to exist in its current state. This is why scarcity is considered to be the fundamental problem of economics.

Learn more about Economics

Related Questions

  • Q:

    What problems does scarcity pose?

    A:

    Scarcity causes problems because people in the world place a lot of demand on a large variety of resources, but there are only finite amounts of those resources available. Scarcity is a measurement of supply that means the quantity or availability of a resource is low.

    Full Answer >
    Filed Under:
  • Q:

    Why is economics considered a social science?

    A:

    Economics is a social science because it examines the social behavior of human beings with regards to allocation of scarce resources in order to meet the needs of each individual in the society. Economics does not only involve production and distribution of goods and services, but also the human factor.

    Full Answer >
    Filed Under:
  • Q:

    What is economic liberalization?

    A:

    Economic liberalization refers to those government policies which promote economic growth by opening up trade to international markets, extending the use of markets and lessening the restrictions and regulations placed on business. China, Brazil and India, three of the fastest growing transitioning economies, achieved their economic growth after their governments liberalized their approach to business. This has led some economists to believe that economic reform is of greater importance than political reform in developing economies.

    Full Answer >
    Filed Under:
  • Q:

    What is economic viability?

    A:

    Economic viability is when a project proves to be economically feasible, innovative and sustainable in terms of investing financial resources into the project. Funding for the project must be compatible with the demands and constraints that occur during the project's life span.

    Full Answer >
    Filed Under:

Explore