Basic Economic Problem:
The basic economic problem is that there are finite resources and unlimited wants; in other words there are unlimited human wants, and resources which are used to make those goods are limited.
The basic economic problem arises when wants are unlimited and resources are scarce.
Scarcity is the basic economic problem because scarce resources are available to satisfy the unlimited wants.
Scarcity exists because wants grow at a faster rate than goods that can be produced.
Thus, scarcity leads to choice.
Opportunity cost is the next best alternative foregone when a choice is made.
Factors Of Production:
These are the inputs in the production process and are used for the production of goods and services.
All natural resources that are locked up in the earth surface, including minerals, fossil fuels, forests timber and oil.
It is the physical and mental capability of manpower which consists of all skill knowledge, energies that are provided by the working population.
Labour can be considered as the human resources available.
e.g teachers, coal miners and factory workers which include both skilled and unskilled workers.
Capital consists of all man – made resources, which help in the production of other goods and services.
e.g. machinery, tools
Enterprise is the process of managing and deciding how factors of production should be used in order to make profits.
The person who undertakes this responsibility is known as the entrepreneur. An entrepreneur is a person who takes the risk of opening a new business (risk –taker).