The basic economic problem In our modern day and age our human resources are becoming scarcer by the day; however our wants are becoming more and more infinite. It is because of this that we are forced to allocate our human resources so that all of our needs are met, and so leading to competition for resources.
A need is something that can be seen as being essential to survival, such as food, water, shelter and warmth. A want is something that we would like to have but which is not essential to survival - a car, the latest version of the PlayStation, that new top you have seen in Top Shop, the mobile phone with all the latest gadgets on etc.
Part of the problem is the fact that resources are not distributed evenly between countries and societies. The terms 'wants' and 'needs' are also relative terms. 'I really, really want a Ferrari' might be the comment of an individual in the UK; 'I really, really want to be able to walk only two miles to get the daily ration of water for my household' might be the cry of an individual in the Sudan
In some tribal society's / spiritual communities you could argue there is no economic problem because the limited resources are more than adequate to meet all their wishes. However, society is mostly dominated by people wishing to consume more goods and services than are available. Because their is a shortage of resources, economics considers:
• What to Produce
• How to Produce
• For Whom to Produce
When there are several choices, not all of the choices will be able to be chosen, and other choices will have to be given up. The benefit lost from the next best alternative is called the opportunity cost of the choice. E.g. if we go to a shop and have a variety of chocolates to choose from the chocolates that we didn't choose would be the opportunity cost.