Money alone cannot solve the economic problem of not having enough resources to satisfy the whole consumer demand. That is why scarcity exists. If money alone can solve the economic problem, then the answer would be obvious – produce more goods and services! Unfortunately, the answer is not so simple.
Why scarcity exists?
Unlimited wants cannot be met because there are limited factors of production: land, labor, capital and enterprise. There are not enough of these factors of production currently in the world. This creates scarcity – not enough goods and services to meet needs and wants of the global population.
This means that it is not possible to make all the goods and services needed or wanted by the world’s population, roughly 7,800,000 people. In other words, the unlimited wants of consumers cannot be satisfied because of limited factors of production required to produce the goods and services to meet those wants.
So, what managers must do is make careful choices about what to produce using available resources. And customers must make careful choices as well about what to buy based on available income and amount of personal wealth.
