The Economic Problem

Essay by aki710High School, 10th grade October 2013

download word file, 3 pages 0.0

Dear Grandpa,

Last year you encouraged me to opt for the business/economics subject option. You told me that it would be very helpful for me even though I was completely against it. However thanks to you I have learned a lot and am thoroughly enjoying our current unit in the subject. Let me tell you about our new topic in economics and about opportunity cost, scarcity and factors of production.

The basic economic problem is the scarcity of resources. People want more than can be met with their available resources. The human needs are unlimited because they grow and evolve while means of fulfilling needs are limited. To solve the economic problem is the basis of the economic activity of people. For example, for inhalation of air is not an economic action because the air is in abundance. However the consumption of food is an economic action as there is a limited amount of food in the world.

Everyone faces scarcity.

The economic goods are not created on their own. It is the result of people's effort that use whatever is available to them, to create resources that meet their needs. The elements that are necessary for the creation of goods are called the factors of production. When it is said that economic goods are in relative scarcity or shortage, in fact it is meant that there is a scarcity of the factors of production (land, labor, capital and enterprise). These factors of production are needed to set up any firm and all of these are equally important. Land is all the natural resources provided by nature, this includes fields, forests, oil, gas, metals etc. They are important as they are used to manufacture the goods. Labor is the efforts of people needed to create the product. Labor is important...