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What is Economic Problem?


Economic Problem is the problem of Choice which arises due to scarcity of resources, which have alternative uses.


We know it very well that human wants are never-ending. At the time one is accomplished, another one arises. These wants no doubt is the biggest motivation for us to work but at the same time, they create a problem also. They are unlimited but the resources that we need to accomplish them are limited. 

Let’s take an example. 

Kanika is a Confectioner (sweet manufacturer). She purchased 5 kgs of milk. Do you know what options she has to use milk? 

She can prepare cheese, rashgulla, mawa and even many more. But in limited quantity, as she has only 5 kgs of milk. Even it may be possible that she will not be able to prepare all sweets which she wants from this small quantity of milk. 

Here, we can see that – 

  1. Kanika has a desire for unlimited profit as she is a producer. 
  2. But her resource is only 5 kgs of milk. 
  3. And even this resource has alternative uses.

So, she will choose that sweet which will help her in earning maximum profit.


  1. Problem of Choice
  2. Problem of economical use of scarce resources 
  3. Problem of economising the resources 

Causes of Economic Problem 

From the above mentioned example, it is very clear that there are 3 main causes of economic problem – 

  1. Human wants are unlimited means they are never-ending. 
  2. The means or resources to fulfill these wants are scarce or limited. 
  3. These resources have alternative uses that call for the effective use of these resources. 


The economic problem is inherent in every economy. No one can escape from this. But yes can handle it well by the effective allocation of scarce resources which have alternative uses to maximize – 

  1. Economic gain at the individual level, and 
  2. Social welfare at the level of the economy as a whole. 

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