Describe the three basic/core economic problems facing all economies.
Economic problems emerge because our desire for goods and services to consume is greater than our ability to produce those goods and services. As humans, we have unlimited wants and limited resources. This is referred to as scarcity, which exists because there are insufficient resources to produce the goods and services to fully satisfy all wants. Another part of the problem is the fact that resources are not distributed evenly between countries and societies. As a result we are forced to choose among alternative options. For example, you might go into a shop and see two great-looking pairs of jeans but you only have enough money (resources) to buy one of them. Another example is that, a business might have received a major order for its products and wants to increase production but does not have the staff or the equipment and raw materials to meet the order in full.
The above mentioned examples highlight the problem of scarce resources in relation to wants and needs. Because no economy can produce enough goods and services to satisfy all its citizens’ wants, choices must be made. The decision to have one thing over another involves a cost. Not a monetary cost, but what is known in economics as an opportunity cost, that is the next best alternative foregone. In other words, the cost of any choice that you make is the value of the best opportunity that you give up in order to make that choice.
In an economy, the supply of goods and services results from the production process where various inputs are brought together and combined to create goods and services. These inputs are classified into the three "factors of production" namely, land, labor and capital.
Land refers not only to land in the conventional sense of tracts of ground, but all other natural resources, that is, gifts of nature,