Paper 3 · Basic economic problem / economic systems
In economics, the basic economic problem describes a situation in which...
Ahuman wants for goods and services are unlimited while the resources such as land, labour, capital and enterprise available to satisfy them are limited.
Bthe government fixes the prices of all goods and services sold within the domestic economy instead of leaving this to the market.
Cthe exchange rate between the local currency and major foreign currencies keeps moving up and down on a daily basis because of ongoing shifts in the country's overall balance of payments position.
Dworkers keep moving from rural farming areas into urban centres in search of factory and mining jobs that pay higher wages.
Explanation: Scarcity, not any single policy failure, is the basic economic problem: because unlimited wants outstrip the limited resources (land, labour, capital, enterprise) available to produce goods and services, every society must choose what, how, and for whom to produce, and each choice carries an opportunity cost.
Derived from ZIMSEC Economics Paper 3, November 2010, Q1
