Economics

Discuss the nature of the economic problem and explain the role that individuals, businesses and government have in addressing it.

Economics is a social science. It studies human behaviour. Economics has two very important terms; wants and needs. Wants are the desires of individuals or communities. They are luxuries that are not necessary for human survival. Whereas, needs; are the basic needs that are necessary for human survival. And in saying so, the economic problem arises; the problem of scarcity of resources in relation to human wants.

The demands of goods and services are overreaching. The wants of a society for goods and services are exceeding the process of production of those resources.

Individuals, Businesses and Governments all play a significant role in the economic world. But how exactly?

Individuals deal with the economic issue of scarcity of resources by having to make rational choices and decisions. Individuals have an outstanding amount of the desires of goods and services. The number surpasses the ability to produce these resources. Therefore, it results to rational choices. These rational choices are also known as the Opportunity Cost.

Opportunity Cost is the cost of the better alternative foregone. For example. A consumer has a budget of $50 and has to choose between two pieces of clothing. Either spending $20 on skinny jeans or spending $30 on a jacket. Logically, the consumer would generally buy the cheaper alternative; in this case, being the $20 skinny jeans. Hence, the $20 skinny jeans would be the opportunity cost.

A business also has to deal with the economic problem of scarcity of resources. But alternatively to the consumers. Businesses have to keep up with the demands of goods and services from consumers. In this circumstance, businesses constantly have to think about the best ways of making profit to keep their business successful.

As doing so, businesses take in consideration; Minimizing costs. When minimizing...