The element which gives rise to economic problem is that resources are scarce in relation to wants. If the resources, like wants, were unlimited, no economic problem would have arisen because in that case all wants would have been satisfied and there would have been no problem of choosing between all wants and allocating the scarce resources between them.
Because the resources are scarce, all wants cannot be satisfied. Therefore, human beings have to decide that for the satisfaction of which wants the resources should be used and which wants should be left unfulfilled. It should be noted that means or resources here refer to natural productive resources, man-made capital goods, consumer goods, money and time available with man, etc. If the means or resources were unlimited, then we would have obtained goods in the desired quantities because in that state of affairs goods would have been free goods. But in actual life, we cannot obtain goods freely or without price. We have to pay a price for them and make efforts to obtain them.
Resources or means have various alternative uses. In other words, the resources can be put to various uses. For instance, coal can be used as a fuel for the production of industrial goods, it can be used for running trains, it can be used for domestic cooking purposes and for so m.any other purposes. Likewise, monetary resources can be utilized for the production of essential consumer goods, for the production of capital goods and so many other goods. It has to be decided how the resources have to be allocated among different uses. The man or society has, therefore, to choose the uses for which resources have to be employed. If the resources had a single use only, the question of choice would not have arisen at all. In the case of single use of resources, they would have been employed for the uses for which they are meant. It is because of the various alternatives uses of the scarce resources that we have to decide about the best allocation of resources.
Thus, economic problem is the problem of scarcity and economics is the logic of choice. It is a challenge to scarcity. It tells us how man can use the best choice tackling the problem of scarcity of resources.
