Basic Economic Problem.docx - Basic Economic Problem The fundamental economic problem is the issue of scarcity and how best to produce and distribute

Basic Economic Problem.docx - Basic Economic Problem The...

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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. Unlimited wants mean that there is no end to the quantity of goods and services people would like to consume. Because of unlimited wants – People would like to consume more than it is possible to produce (scarcity) Fundamental economic question Therefore because of scarcity, economics is concerned with: What to produce? How to produce?
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For whom? Examples of the economic problem Consumers Households have limited income and they need to decide how to spend their finite income. For example, with an annual income of £20,000, a household may need to spend £10,000 a year on rent, council tax and utility bills. This leaves £10,000 for deciding which other food, clothes, transport and other goods to purchase.
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