Explain what is meant by the basic economic problem?

Answer 1

Economic problem is the problem regarding allocation of limited resources for the production of alternative goods and services. in other words, economic problem is the 'problem of choice'. Since the resources are scarce and they have alternative uses, there arises the problem of choice regarding the use of these resources. The law of scarcity states that goods are scare because there are not enough resources to produce all goods that people want to consume. Thus, Economic Problem is the 'problem of relative scarcity' and the 'problem of choice' arising therefrom.

The basic economic problems of an economy are given below:

1. What to produce and how much to produce?
2. How to produce?
3. For whom to produce?
4. Problem of fuller utilisation of resources.
5. Problem of efficiency in utilisation of resources.
6. Problem of economic growth.