why are economic activities called the root of economic problems ?


An economics activity is the one which involves the use of scarce resources to carry out production, consumption, saving, investment, etc. These activities involve the exchange of money to earn livelihood. Scarcity is the root cause for all economic problems. No matter, how well a particular economy is endowed with resources, these resources will be relatively scarce to fulfil its unlimited wants. Moreover, these scarce resources have alternative uses and can be allocated to the production of different goods and services. Allocation of resources to any particular use involves a cost in terms of sacrifice of the other possible uses. To allocate the scarce resources in the best possible manner, an economy needs to analyse the cost (i.e. the opportunity cost) of allocating the resources to one use while sacrificing the other uses. Thus, it is due to the scarce availability of resources (having alternative uses) to fulfil the different and competing unlimited wants that an economy faces the economic problem or the problem of choice.

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