Basic Economic Problem

Fundamental economic problem is scarcity, or the limited number of resources is outnumbered by unlimited number of wants from the people, 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. To help slow down the scarce resources from being depleted, we use opportunity cost by making a sacrificing something to obtain another thing, like when we want to buy a product such drink we may sacrifice coke to obtain fanta, with this solution we can slow down the depletion of resources.

Then the allocation of resources is affected by these question, what to produce, how to produce and for whom it’s produced, these question help to allocated the resources efficiently to make sure all resources used to obtain it’s maximum potential, what to produce is about deciding what to produce that based on consumer demand or what they need, for example when there’s a new kind of clothing’s trends the producer will respond to their demand and decide to produce clothes rather than cars, how to produce is about a method of production that the producer thinks that can produce with the lowest cost the can attain or least cost method, by using a labor intensive or capital intensive method of production, and for whom, is the product suitable for all people, or only those who can really afford it, it’s to decide the price level of the product they made.