Economic problem
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The basic economic problem is a term used in economic theory. It asserts that there is scarcity, such that finite resources available are insufficient for satisfying all human wants. The problem then becomes determining what limited goods and services an economy is to produce, for example, more or less on public services, housing, agriculture, or manufacturing. It also may determine how the goods and services are to be produced, as capital or labour usage and the efficiency to produce as much as is consistent with limited resources.
There are four reasons why wants and needs may exceed production possibilities:
- Goods eventually wear out and need to be replaced.
- New or improved products become available.
- People get fed up with what they already own.
- As wages increase, demand increases.
[edit] Limited resources
Commodities (goods and services) are created by utilisation of resources. The resources shown below are sometimes called factors of production.
In types of commodity a free good is available without the use of resources. For example, there is no opportunity cost for air above ground. An economic good is a commodity in limited supply. However the difference between a free good and an economic good alters with the opinion of the economist. For example within the Amazon Rainforest rainwater is not considered as scarce because it is in mass abundance, but 'fresh water' is considered as scarce because it is hard to come by.
Expenditure on producer or capital goods is called investment.ta:அடிப்படை பொருளாதாரப் பிரச்சனைகள்
