Introduction

The basic economic problem is the scarcity of resources. People want more than can be met with their available resources. The human needs are unlimited because they grow and evolve while the means of fulfilling the needs (financial assets) are limited (Stiglitz 1992: 48). The effort to overcome the relative lack of goods, in other words to solve the economic problem is the basis of the economic activity of people. If the satisfaction of a need does not have a shortage of the appropriate resource, the action for the acquisition of this instrument is not classified as economic. The effort, for example, for inhalation of air lacks is not an economic action because the air is in abundance.

The economic goods, of course, are not created on their own. It is the result of people’s effort that use whatever is available to them, to create resources that meet the needs i.e. the goods. The elements that are necessary for the creation of goods are called productive assets. Consequently, when it is said that economic goods are in relative scarcity or shortage, in fact it is meant that there is a scarcity of productive assets (nature, labor, capital).

The problem of scarcity of resources has as a result the allocation of resources. In other words the process of the selection of needs to be met and the amount of resources used to meet them. Thus economics is a social science, which deals with how society allocates scarce resources among unlimited wants and needs (Wilson & Clark 1999:21). The question that arises is how people allocate scarce resources to get the most value.

Scarcity of production assets

• The scarcity of the asset “nature” is obvious that is due to the fact that land is limited in size and productive forces.
• The scarcity of the asset “labor” is due to the limited number of people able to work and to the fact that each person can only work a certain number of hours a day.
• The asset “capital” is the result of nature and labor and these are in scarcity, the chapter will also be in scarcity.

The Basic Economic Problem and the Market Mechanism

The above mentioned definition, contained in most introduction to economic theory manuals conceals through a non historical generalization the fact that the main body of economic science has dealt with the analysis of capitalist societies which are characterized, on the one hand, by the private ownership of the means of production and unequal power relations between wage labor and capital and on the other from freedom of entrepreneurial activity and the competition of capital assets in the market.