The Central Problem of Economics
Needs and Wants
Needs are the things we can’t survive without. They are necessities of life e.g. food, clothing, shelter, water, basic wealth and basic education.
Wants are the things we desire to have or own but we can survive without them e.g. cell phones, TVs, oars, radios, entertainment etc.
Our want are unlimited and we never seem to be satisfied with what we have. It is people’s wants rather than their needs we provide the motive for economic activity. The economic resources that are available to satisfy our wants are limited. These resources are called factors of production which are :
Land (Natural Resources)
Land refer to natural resources over which people have power of disposal and of which may be used to yield income/money e.g. farming and building land, forests, mineral deposits, air, seas, oceans, vegetation, fisheries. The reward for land is rent.
Labour
Labour is human effort – physical or mental which is directed to the product of goods and services. Reward for labour is wages/salary.
Capital
Is money and all man-made assets used in the production of goods and services e.g. money, machinery, factories, delivery vans etc. Reward for capital is interest.
Enterprise
Land, labour and capital on their own will not produce anything. There must be a person or people who will organise the 3 factors of production so that production can take place. Whoever takes these decisions and consequent risks is known as the entrepreneur. Reward for enterprise is profit.

The basic economic problem
It is about unlimited wants versus limited resources. Our wants seem to be never ending because if we satisfy one another develops. The resources are limited in supply – scarce. The basic economic problem is of scarcity. Economists try to explain how this basic economic problem is solved by different economic systems.