The Economics Problem

Economic theory deals with the laws and principles which govern the functioning of an economics and its various parts.  An economics exists because of two basic facts.  Firstly, human wants for goods and services are unlimited and secondly, productive resources with which to produce goods and services are scarce.

 If our wants are virtually unlimited and our resources Scarce, We cannot then satisfy all our wants and desires by producing everything we want.  That being the Case, an economy has to decide how to use its scarce resources to obtain maximum possible satisfaction of the member of the society. It is the basic problem of scarcity which gives rise to many of the economic problems which have long been the concern economists.

Because it is not possible to satisfy all wants with the limited means of production, every society must decide some way of selecting those want which are to Be satisfied. The necessity for economizing arises therefore from the fact that we have limited productive resources such as land, raw material skilled manpower, capital equipment, etc. at our disposal. Because these resources are found in limited quantity [the quantity may increase over time], the goods they can produce are also limited. 

Goods are scarce because the productive resources are scarce.  Since the resources are limited in relation to our unlimited wants, we should get the most out of what we have .Thus a society is faced with the question of choice. If it is decided to use more resources in one line of production, then resources must be withdrawn from the production of some other good. Because of the scarcity of resources, we are confronted with the problem of choosing among the different channels of production to which resources are to be devoted.

In other words, we have the problem of allocating scarce resources so as to achieve the greatest possible satisfaction of wants. This is the economic problem. It is also called economizing problem.

We have economic systems or economies because we are confronted by the economic problem; economic all economies irrespective of characteristics   or qualities are fashioned, moulded  and maintained solely because this problem exists.  To understand the economic problem is to know the purpose and function of economic systems.  The economic problem is thus the central core of economic.

The economic problem is thus the central core of economics . The economic problem arises from

two basic inter related facts ;

 [1] Man’s unlimited desire for the good in the aggregate; and 

[2] The limited capital, natural and human resources available to a society for the production of good in the aggregate.