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CAUSES OF ECONOMIC PROBLEM

Economic problem is related to the all types of economy rather it is developed, developing or underdeveloped. It is due to the some causes, which are given as under:

Limited Resources 

Limited resource is the basic condition of nature which means that the quantities of available resources used for the production of goods and services are limited. It means that the economy has only some resources that can be used at any given time to produce goods and services. Limited resources are one half of the fundamental problem of scarcity that has plagued humanity since the beginning of time. Huge amount of goods and services are needed to satisfy individual needs and wants. To satisfy hunger, someone needs bread, fruit or milk. The elements or substance which satisfied our needs and wants are divided into the five categories:

1. Natural Resources-are materials found in nature (air, water, plants, timber, animals  etc.)

2. Raw Materials-are resources that will be made into finished products

3. Renewable Raw Materials-are those raw materials that can be grown and therefore replaced.

4. Nonrenewable Raw Materials-which cannot be grown or replaced.

5. Synthetic Materials-are man-made materials. (Nylon, Dacron, polyester are synthetic fibers as contrasted to cotton, silk, and wool which are natural fibers)

 

Consider the following four broad resource categories:

1.      Labour. This is the mental and physical effort of humans (excluding entrepreneurial · organization) that are used for the production of goods and services.

2.      Capital. This is the manufactured, artificial, or synthetic good used in the production of other goods, including machinery, equipment, tools, buildings, and vehicles.

3.      Land. This is the naturally occurring material of the planet that are used for the production of goods and services, including the land itself; the minerals and nutrients in the ground; the water, wildlife, and vegetation on the surface; and the air above.