Basic problem of an economy
What is an Economy?
Every individual of the society, to earn his livelihood, is engaged in earning in one way or the other. All are indulge in different occupation. Some earn their livelihood by doing service, some by running busines, some by teaching and others by cultivating the land, still others by plying autorickshaw or by running a tea stall. In this way, the entire working population of a country is occupied, produces goods and services. In return, it gets reward or income which provides living. It is by this income that people satisfy their different wants. Accourdingly, economy of a country includes the entire population engaged in agriculture, forestry, mines, business, schools, colleges, cinema houses, offices, banks, hospitals, roads, canals, railways etc. , with a view to earning living to satisfy its wants. Such an economy may pertain to a village, town , country or the world as a whole. Briefly, as said by A.J.Brown, "economy is a system by which people of an area earn their living."
Now we shall understand economic problems and reasons behind economics problems.
Human wants are unlimited but the means which can satisfy these wants are not unlimited(limited). It is not possible for an economy to produce every kind of good for every citizen because no economy has unlimited resources. Hence, every economy has to make a choice as to how to make optimum use of its available resources like land, labour and capital which have alternative uses. For instance, it has to be decided as to how much of the resources should be utilised for the production of cloth and how much for the production of sugar. Thus, problem regarding allocation of resources across different uses is called economic problem. In other words, economic problem is a problem of choice or problem of economcal use of scarce resources. It may, however, be noted that economic problem is not concerned with the allocation of present resources only, it is also the problem of their growth and distributin in future. Accordingly, economic problem refers to that problem which is concerned with the optimum allocation of present resources alongwith the growth and distribution of future resources.
In the words of Leftwitch,"Economic problem is concerned with the use of scarce resources among alternative human wants and in using these resources towards the end of satisfying wants as fully as possible."
Reasons behind Economic Problems:
1. Unlimited Wants
2. Limited or scarce Means
3. Alternative Uses of means
Every individual of the society, to earn his livelihood, is engaged in earning in one way or the other. All are indulge in different occupation. Some earn their livelihood by doing service, some by running busines, some by teaching and others by cultivating the land, still others by plying autorickshaw or by running a tea stall. In this way, the entire working population of a country is occupied, produces goods and services. In return, it gets reward or income which provides living. It is by this income that people satisfy their different wants. Accourdingly, economy of a country includes the entire population engaged in agriculture, forestry, mines, business, schools, colleges, cinema houses, offices, banks, hospitals, roads, canals, railways etc. , with a view to earning living to satisfy its wants. Such an economy may pertain to a village, town , country or the world as a whole. Briefly, as said by A.J.Brown, "economy is a system by which people of an area earn their living."
Now we shall understand economic problems and reasons behind economics problems.
Human wants are unlimited but the means which can satisfy these wants are not unlimited(limited). It is not possible for an economy to produce every kind of good for every citizen because no economy has unlimited resources. Hence, every economy has to make a choice as to how to make optimum use of its available resources like land, labour and capital which have alternative uses. For instance, it has to be decided as to how much of the resources should be utilised for the production of cloth and how much for the production of sugar. Thus, problem regarding allocation of resources across different uses is called economic problem. In other words, economic problem is a problem of choice or problem of economcal use of scarce resources. It may, however, be noted that economic problem is not concerned with the allocation of present resources only, it is also the problem of their growth and distributin in future. Accordingly, economic problem refers to that problem which is concerned with the optimum allocation of present resources alongwith the growth and distribution of future resources.
In the words of Leftwitch,"Economic problem is concerned with the use of scarce resources among alternative human wants and in using these resources towards the end of satisfying wants as fully as possible."
Reasons behind Economic Problems:
1. Unlimited Wants
2. Limited or scarce Means
3. Alternative Uses of means
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