Question
Why does an economic problem arise? Explain.

Answer

The problem arises due to:

  1. Limited resources

Resources, ie. land, labour, capital, etc. are available in limited quantities in an economy and cannot produce all what people want.

  1. Unlimited wants

Wants of the people are unlimited and keep on multiplying and cannot be satisfied due to limited resources.

  1. Resources have alternative uses

A resource can be used for producing more than one product. This creates a problem. Which product should be produced or which want should be satisfied first.

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