Question

The Economic Problem is a fundamental problem of Economics

Write an 800 words essay about this.

Identify the key concepts relevant to answering the question

Links these concepts together and logically to make an argument that runs through the whole essay.

•             State the main theoretical concepts - Definitions ( Expect min 4 max of 5)
•             Explain briefly how each theoretical concept defined works           
•             Illustrate the theory – for the main concepts draw a Graphs or a Diagram
•             Use examples from real world
•             Evaluation - Do these theories always works in real world

Answer 1

The Economic Problem is a fundamental problem of Economics:-

Basic Economic Problem. The fundamental economic problem is the issue of scarcity and how best to produce and distribute these scare resources. Scarcity means there is a finite supply of goods and raw materials. Finite resources mean they are limited and can run out.

From the study of the essential processes of an economy, it would appear that some fundamental problems arise whatever the type of the economy.

An economy 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.

Wants being unlimited and our resources being limited, we cannot satisfy all out wants. That being so, an economy has to decide how to use its scarce resources to give the maximum possible satisfaction to the members of the society.

Some basic problems called Central Problems of an economy, which are:

(i) WHAT to Produce.

(ii) HOW to Produce.

(iii) FOR WHOM to Produce