• There are finite resources available in relation to the infinite wants and needs that humans have

  • Needs are essential to human life e.g. shelter, food, clothing

  • Wants are non-essential desires e.g. better housing, a yacht etc.

• Due to the problem of scarcity, choices have to be made by producers, consumers, workers and governments about the best (most efficient) use of these resources

• Economics is the study of scarcity and its implications for resource allocation in society

All Stakeholders in an Economy Face The Basic Economic Problem

Consumers

• In a free market, scarcity has a direct influence on prices

• The scarcer a resource or product, the higher the price consumers will pay

Producers

• Producers selling products made from scarce resources will find their costs of production are higher than if they were selling products made from more abundant resources

Workers

• Workers may want a more comfortable & safer working environment but their employers may not have the resources to create it

Government

• Governments have to decide if they will provide certain goods/services or if they will allow private firms to provide them instead

• Their decision influences the allocation of resources in society. E.g. If they choose to provide national healthcare, fewer Doctors will be available to work in private healthcare