THE BASIC ECONOMIC

PROBLEM:SCARCITY AND CHOICE

SCARCITY
The fundamental economic
problem faced by all societies
is Scarcity. The economic
resources are insufficient to satisfy
human wants and needs. Human
wants are unlimited, but the
means to satisfy human wants are
limited.
The Basic Economic Problem
We can look at the Basic Economic Problem as:

1. What to produce?
2. How to produce?
3. For whom to produce for?
The Basic Economic Problem
What to produce?
Since resources are
limited, societies must decide
what goods and services to
produce and in what quantities.
How to produce?
This problem refers
to selection of technique to
be used for production of
goods and services.

For whom to produce for?

This problems deals with
the issue of deciding the
category of people who will
consume the goods.
Factors of Production
Rewards for Factors of Production

REWARD: REWARD:
RENT WAGES

REWARD: REWARD:
PROFIT INTEREST
Opportunity Cost
Opportunity cost is the next best
alternative forgone by choosing
another item.