Introduction

The reason we have to make choices is the existence of scarcity. There is simply not enough time in a day to do all the things you need or want to do. So you are forced to choose between alternatives. Or it might be that you do not have enough income to purchase the goods and services you need and want.

If one looks at different definitions of economics you will see that a central theme is the issue of scarcity. Here are some of the well-known definitions of the field of study of economics:

"Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses."

Lionel Robbins

"Economics is concerned with wants and resources."

Robert Mundell

"Economics is the study of scarcity, which results when people want more than can be produced."

Ferguson & Maurice

"Economics is the study of the use of scarce resources to satisfy unlimited wants."

Richard Lipsey

"Economics is the study of how people use their limited resources to try to satisfy unlimited wants."

Michael Parkin

According to these definitions, the economic problem, also referred to as the scarcity problem, arises because the resources that we have available for the production of goods and services are limited, while our needs and wants for goods and services are unlimited. It is this fundamental problem of scarcity that is the common thread that binds all the topics that are studied in economics.

Watch the following video clip on the economic problem

Let’s now explore what unlimited needs and wants and scarce resources actually mean.