Fundamental Problems of Economic System
UNIT 1 – FUNDAMENTAL PROBLEMS OF ECONOMIC SYSTEMS
1.1 INTRODUCTION
In this unit you will get acquainted with the fundamental problems of the economy. The understanding of the concept will help you bring closer to the basic idea of the economy’s problems as well as remedies of such problems. In this unit you will get detailed description of what is an economic system, problems of economic system, factors of production, concept of production possibility curve, and the fundamental of allocation of resources in different types of economies.
1.2 AN ECONOMIC SYSTEM
Before we further move on we have to know about the sources of economic problems and a brief about the economic system.
1.2.1 Scarce Means and Unlimited Wants
Want is Want is an effective desire for a thing, which can be satisfied by making an effort for obtaining it. We have unlimited wants and as one want gets satisfied another arises. For instance, one may have the desire to buy a car or a flat. Once the car or the flat is purchased, the person wishes to buy a more spacious and designable car and the list of his wants does not stop here but goes on one after another. As human wants are unlimited, we have to make a choice between the most urgent want and less urgent wants. Thus the problem of choice arises.
Means also known as resources are limited. Means are the ways to derive the satisfaction of the various wants. For instance, money is an important means to satisfy many of our wants. As stated, means are scarce and as such these are to be used optimally. In other words scarce or limited means are to be judicially used and economized to get the maximum satisfaction.
Another problem which is to be viewed is that resources have alternative uses i.e. the same resource can be used for more than one purpose. For example, money can be used either buying a laptop or a play station, all depends on how you perceive the urge of the desire or want you want to satisfy.
1.2.2 An Economic System or Economy
The term
1.1 INTRODUCTION
In this unit you will get acquainted with the fundamental problems of the economy. The understanding of the concept will help you bring closer to the basic idea of the economy’s problems as well as remedies of such problems. In this unit you will get detailed description of what is an economic system, problems of economic system, factors of production, concept of production possibility curve, and the fundamental of allocation of resources in different types of economies.
1.2 AN ECONOMIC SYSTEM
Before we further move on we have to know about the sources of economic problems and a brief about the economic system.
1.2.1 Scarce Means and Unlimited Wants
Want is Want is an effective desire for a thing, which can be satisfied by making an effort for obtaining it. We have unlimited wants and as one want gets satisfied another arises. For instance, one may have the desire to buy a car or a flat. Once the car or the flat is purchased, the person wishes to buy a more spacious and designable car and the list of his wants does not stop here but goes on one after another. As human wants are unlimited, we have to make a choice between the most urgent want and less urgent wants. Thus the problem of choice arises.
Means also known as resources are limited. Means are the ways to derive the satisfaction of the various wants. For instance, money is an important means to satisfy many of our wants. As stated, means are scarce and as such these are to be used optimally. In other words scarce or limited means are to be judicially used and economized to get the maximum satisfaction.
Another problem which is to be viewed is that resources have alternative uses i.e. the same resource can be used for more than one purpose. For example, money can be used either buying a laptop or a play station, all depends on how you perceive the urge of the desire or want you want to satisfy.
1.2.2 An Economic System or Economy
The term