Basic Problems of an Economy — Flashcards

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An economic problem generally means the problem of making choices that occurs because of the scarcity of resources. It arises because human wants are unlimited, while resources are limited.

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Economic problem is concerned with the uses of scarce resources among alternative human wants and in using these resources towards the end of satisfying wants as fully as possible.

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Scarcity means only a limited amount of resources exists, so only a limited amount of goods can be produced. Because wants are unlimited, not all wants can be satisfied at the same time, so choices ha…

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The three causes are: unlimited wants, limited resources, and resources having alternative uses.

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Lionel Robbins was a professor at the London School of Economics. His book An Essay on the Nature and Significance of Economic Science was published in 1932 and explained the reasons for the emergence…

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Human wants are recurring in nature and must be satisfied repeatedly. As soon as one want is satisfied, another may arise. Wants are also many and differ in urgency, so choices must be made.

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Land, labour, capital, and enterprise are called factors of production. These resources are used to produce goods and services.

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If resources were unlimited, goods could be produced in any quantity needed, so scarcity would not exist. Without scarcity, there would be no need to choose among competing wants.