explain the problems faced by all economies and what are its reasons
11th class Commerce - Economics
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Answers
Answer:
Some of the main reasons for the existence of economic problems are given below:
(i) Scarcity of Resources:
Resources (i.e. land, labour, capital, etc.) are limited in relation to their demand and economy cannot produce all what people want.
It is the basic reason for existence of economic problems in all economies. Scarcity is universal and applies to all individuals, organisations and countries. There would have been no problem, if resources were not scarce.
(ii) Unlimited Human Wants:
Human wants are never ending, i.e. they can never be fully satisfied. As soon as one want is satisfied, another new want emerges. Wants of the people are unlimited and keep on multiplying and cannot be satisfied due to limited resources.
Human wants also differ in priorities, i.e. all wants are not of equal intensity. For every individual, some wants are more important and urgent as compared to others. Due to this reason, people allocate their resources in order of preference to satisfy some of their wants. If all human wants had been of equal importance, then it would have become impossible to make choices.
(iii) Alternate Uses:
Resources are not only scarce, but they can also be put to various uses. It makes choice among resources more important. For example, petrol is used not only in vehicles, but also for running machines, generators, etc. As a result, economy has to make choice between the alternative uses of the given resources.
Explanation:
India
Explanation:
Causes of Economic Problem:
(i) Unlimited Wants
Human wants are unlimited in numbers. There is no end of human wants; whenever one want is satisfied, automatically the other wants crop up and this goes on and on. There are several wants which are recurring in nature like, food, clothes, shoes, etc. Moreover, human wants are increasing day by day with the development of education, knowledge and civilisation.
(ii) Limited Resources:
In economics, scarcity means that commodities and resources to produce goods and services are less in relation to their demand. Goods and services that satisfy human wants are produced with the help of resources such as land, labour, capital and enterprise. These resources are scarce while wants are unlimited. Due to scarcity of these resources, an economy cannot produce all that goods and services as required by its citizens. Consequently, some wants remain unsatisfied.
(iii) Alternative Uses of Resources:
Means are not only limited but also have alternative uses. Hence, choice has to be made for different alternative uses. For example, electricity can be used for lighting lamps or for cooking food or for operating TV, Fridge, music system etc. Similarly, there are many resources which have got their alternative uses. This characteristic makes resources scarce. Thus, every economy has to choose better alternative uses of resources to which they can be put.