the basic economic problem
by tom lewis
there are many different types of economic systems, but all of them face the same kinds of problems. the most basic problem faced by any economic system is that of scarcity. scarcity is the conflict between unlimited wants and limited resources. at any point in time, the quantity of resources that can be used to produce goods and services is limited. but consumers always want more goods and services than can be provided.
to decide how to use their scarce resources, economies must answer three basic questions:
1. what goods and services should be provided?
2. how should goods and services be produced?
3. for whom should goods and services be produced?
as you can see, each of these questions involves a choice. decisions must be made about how resources are used. for example, there is only so much wheat grown every year. some people want bread, some want cereal. only a certain amount of each product can be made because of the scarcity of the wheat. in the same way, a business must decide how to efficiently use its resources to prosper. individuals and families have limited incomes and must decide how to spend wisely to satisfy as many of their wants as possible. people also have limited time — they can use some of their time for work, some for leisure.
all groups in society face limitations of various sorts and must make choices to make the most of the resources they have.
based on the passage, which of the following statements about resources is correct?
a
resources in some economic systems are unlimited.
b
resources in an economy are fixed at any given moment.
c
all economies have the same resources at their disposal.
d
resources in an economy determine what consumers want.