Basic economic problem

The main premise of economic problem is that human needs and wants are unlimited but resources are limited in nature. Thus, scarcity of resources which means that in order to produce one good, you have to sacrifice other good.

1. BASIC ECONOMIC PROBLEM: SCARCITY AND CHOICE

2. Scarcity and Choice

3. Basic Economic Problem

4. What To Produce?

5. How To Produce?

6. For Whom To Produce? This problem is related to the distribution of goods & service in the economy. It is related to the choice between :- Production of goods and services for the richer section of society . Or Production of goods and services for the poorer section of society. Production of goods and service for poor leads to maximum social welfare, whereas production of goods and services for rich leads to more profit.

7. Efficiency of Production

8. Efficiency of Production Points B, C and D are all productively efficient, but an economy at A would not be, because D involves more production of both goods. Point X cannot be achieved.

9. Economic Growth

10. Economic Growth Outward shifts of the curve represent economic growth. An outward shift means that it is possible to increase the production of one good without decreasing the production of the other.

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