What is the economic problem? Free essay! Download now
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What is the economic problem?
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| Words: 526 | Submitted: 05-Apr-2011
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DescriptionThe economic problem, sometimes called the 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.
The economic problem, sometimes called the 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. 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. 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 human 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.
A economics problem by several ways. A mixed economy is a mixture of a pure free-enterprise market economy and a command economy. Nearly every country in the world operates a mixed economy although the "mix" can change. There is a private sector and a public sector in the economy. In recent years many command economies have become mixed economies. Examples include countries that were part of the former Soviet Union. To become a mixed economy, the role of the market and the private sector of the economy must be increased. This can be done in a variety of ways such as privatisation of state industry,de-regulation of markets promoting increased competition through the entry of new firms,a gradual ending of state subsidies, and encouraging foreign investment into the economy.
A basic economy decisions are to solve an economic problem are first, what should be produced in the economy that explain to what quantities of food, mobile phones or banking services should be produced by the economy? How many trees need to be felled to meet the demand for pulp for newspapers and magazines? Should we spend extra money on national defence or should more resources be devoted to health care and education. Second, how should production be organized explain, should a firm use labour or machinery to produce their goods? How many workers should be employed? Should production take place in London or Newcastle or in the UK or Malaysia? Should Rover plc buy its components from UK or French suppliers? Why has the Vaux Brewery closed down in Sunderland? These are all examples of important ...
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