The economic problem, sometimes called the basic, central or fundamental economic problem, is one of the fundamental economic theories in the operation of any economy. It asserts that there is scarcity, or that the finite resources available are insufficient to satisfy all human wants and needs. The problem then becomes how to determine what is to be produced and how the factors of production (such as capital and labor) are to be allocated. Economics revolves around methods and possibilities of solving the economic problem. In short, the economic problem is the choice one must make, arising out of limited means and unlimited wants. he economic problem is most simply explained by the question "how do we satisfy unlimited wants with limited resources?" The premise of the economic problem model is that wants are constant and infinite due to constantly changing demands (often closely related to changing demographics of the population). However, resources in the world to satisfy human wants are always limited to the amount of natural or human resources available. The economic problem, and methods to curb it, revolve around the idea of choice in prioritizing which wants can be fulfilled.. and how do we know what to produce for the economy. Needs
Needs are material items people need for survival, such as food, clothing, housing and ware. Until the Industrial Revolution, the vast majority of the worlds population struggled for access to basic human needs. Wants
While the basic needs of survival are important in the function of the economy, wants are the driving force which stimulates demand for goods and services. In order to curb the economic problem, economists must classify the nature and different wants of consumers, as well as prioritize wants and organize production to satisfy as many wants as possible. One assumption often made in mainstream neoclassical economics (and the methods which attempt to solve the economic problem) is that humans...
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