Chapter 1 Economic problem The economic problem is a problem of the scarcity of the available resources essential for the satisfaction of human wants . Scarcity : is a relationship between how much there is of something and how much of it is wanted . Scarcity mean the interaction of unlimited wants with limited resources , has been called the economic problem .

Resources are scarce compared to all of the uses we have for them . Scarce goods versus free goods : Free goods would mean that you could have all you want of everything without having to give up something else you also want . Choice : Scarcity implies that choices must be made , and making choices implies the existence of costs .

Opportunity cost : Is the value of the forgone alternative that you gave up when you got something . The production possibilities frontier ( PPF ) : It shows the maximum output that can be produced in an economy at any given moment , given the resources available . If an economy is fully utilizing its resources then it will be producing on the PPF . The PPF illustrates the concept of opportunity costs .

An outward shift of the frontier might be due to : More training of employees . Greater investment in capital goods . An increase in the population size . Improvements in technology .