Basic (fundamental) economic problems (principles)

There are three fundamental economic problems (principles).   These include scarcity, choice and opportunity cost

• Scarcity. This refers to limited supply  of resources  required  to  produce  goods and  services required to meet human needs.  However, because of scarcity of resources, man decides to meet some of the needs  from the available alternatives by making  choice.
• Choice. This refers to making right selection from the given alternatives to satisfy human wants basing on the available scarce resources. Choice is determined   by the scale of preference.   The Scale   of preference     refers to the list of needs arranged according to the in order of priority (importance), starting with the most pressing needs. By making choice, some alternatives are left out hence opportunity cost,
• Opportunity (Real) cost;  This refers to the  value of the second best alternative foregone when choice is made basing the available scarce resources.

For example if an individual has 100,000/= and she wants to buy two commodities X and Y whereby the price for X is 100,000/= and the price Y is 150,000/=. If he buys commodity X using all his money, she foregoes the value of commodity Y which is worth 150,000/=