Economic problem
is the problem of scarcity of resources in comparison to human wants. In
everyday life we encounter many economic problems such as poverty,
unemployment, inflation etc. But if we start analyzing them, we will find that
every problem has its roots in the fundamental problem of scarcity of
resources. Every society and individual, rich or poor faces it. Individually,
our incomes cannot fully finance our desires, so we get less fruit than we
would like, we have fewer clothes than we would desire, our homes smaller and
our vacations are less enjoyable. To explain the economic problem, we may give
an example of underdeveloped countries where the issue is more severe, there
are not enough schools, hospitals, highways, parks, and the needed teachers,
doctors, engineers, managers, skilled labor and the other people to staff and
maintain them.
Economic problem of mankind owes its roots to the fact that human wants are plentiful and of different kinds. The resources to satisfy the multifarious human wants are limited or scarce. If the time or resources at our disposal are limitless so that we could fulfil all our needs, then no economic problem would have arisen at all. The economic problem has arisen simply as long as one want is satisfied, another want appears on the scene. The following figure shows a see-saw in which on the one hand limited resources and on the other hand unlimited wants.
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| Economic Problem (Unlimited Wants Limited Resources) |
As wants are unlimited and the means to satisfy them are limited, therefore, in order to get maximum satisfaction we are to choose our wants by fixing up a list of priority. So the two foundation stones on which the subject of Economics rests are multiplicity of human wants and scarcity of resources. The scarcity of resources creates two kinds of problems. One is the allocation of resources to the best use so that the utmost satisfaction is attained. This can only be done if we arrange our wants in a scale of preferences. Ordinarily, necessaries are satisfied first, comforts are next and luxuries at the end.
The second problem is to eliminate waste. If in a country the resources are not completely used and they are lying idle, this will mean the maximum satisfaction is not being derived from the limited available resources and are being wasted for nothing. The resources are not only scared but have substitute uses. So a decision has to be made between them. The decision to make choices between substitute uses has to be make by all of us. Even the richest nation has to distribute its resources in such a manner so as to be able to secure maximum satisfaction with minimum cost.
Everybody is busy to satisfy maximum number of his wants. Every economy wants to solve the problem of production, distribution. But the nature of these wants is such that one wants is satisfied, another one arises, so that a large number always remains unsatisfied, As a result, the struggle to produce more goods or get more income continues for the whole life. Wants are of unequal importance and competing people not only want basic necessities of food, housing and clothing but much more. They want many things like cars or videos and carpets and internet. Since they are unable to satisfy every want, people arrange their wants in order of preference. If a commodity is scarce, it does not mean that the quantity available is small. The existence of price of something is a proof that it is not free and is scarce. The hard fact of human life is economic problem which is permanent and it will never end until a man die.
