Everything in life is scarce. So, the basic economic problem is what we can produce using limited resources with proper utilization.Most goods can be produced in more than one ways using resources in different combinations. Which resources and technical process will be employed to produce these goods and services? So the problem after determining what to produce is by what methods are these commodities produce.
fundamental problems
Limited resources and infinite demands create the main economic problem. To solve the economic problem, human being takes four solution, those are:
- Production:
Men, create additional utility using natural resources by technical knowledge and intelligence is called production. In human life want is limited but to fulfill want,resources are scarce. By using scare resources essential product have to produce.
- Distribution
How or by which policy produced goods will be distributed among different people in society? Some factors of production, such land, labor, capital and organization and how the distributed parts of the factor of production like rent, wage interest and profit will be give are another problem.
- Exchange
Exchange means inter change of goods and services with in human society by money. How goods and services will be distributed among different peoples? It also includes how the excessive part of goods and services will distributed, whether in the country or import in other country?
- Consumption
The main purpose of human workforce is consumption. Creating utility means production, consumption means the completion of utility by using. With limited resources how we can get highest satisfaction, human have been trying always to do that.
The four solution of economic problem are interrelated and dependent to each other. Without other single one has no importance.
