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The main problem at the center of economics is how to fulfill unlimited wants with limited resources.

What it means is how you can meet the ever-changing, every growing cloud of desires with resources (basically your materials, time, capital, and machinery) that are limited in both capacity and time.

Therefore, the economy has to answer three questions:

https://i.imgur.com/w4WCj40.png

1. What to produce?
(What goods and services to produce in order to maximize the amount of utility (satisfaction) gained from the product.)

2. How to produce?
(What methods of production should be used to produce the goods and services that are needed)

3. Where should the output go?
(How should the output be distributed to people)

In order to outline the economic problem, we need to learn about the factors of production with a down to earth example...

https://i.imgur.com/6kjTJ62.png

Land is basically all the natural resources that a business uses (water, fish, metal ores, and in our case, the soil the plant grows in)

Labour is the workers who use the natural resources to make a product (In this case, our out-of-shot gardener waters and takes care of our little plant.

Capital is the tools the workers use to create the product (In our case, the watering can and the plant pot is the tools used in growing our rocket)

And finally, enterprise is the idea that unites all of this together (In the case of the picture, it is to grow and sell rocket plants).

In an economy, we can map out how these factors of production are allocated with a production possibilities frontier.

This diagram shows all the combinations of two goods that can be produced within a single economy.

For our example, we will assume that our theoretical economy only produces two goods, CPUs and GPUs.
(In real life economies can produce more than two goods at the same time.)

https://i.imgur.com/obXeovr.png

An economy is productively efficient at point A on the red line. This is when the economy maximizes the use of all available factors to produce either CPUs or GPUs.

At point B inside the red line, the economy is not producing as many GPUs and CPUs as it could at the red line. This may be due to factors that prevent the economy from utilizing them efficiently (e.g. A rise in unemployment).

At point C outside the red line, the economy would have to use more factors of production than it currently has in order to reach this point.

There are two types of efficiencies: productive and allocative.

Productive efficiency is when the economy maximizes the output produced with the factors of production it has. (For this example, it means producing as many GPUs and CPUs as possible with the factors available at the red line.)

Allocative efficiency is when the economy maximizes the benefits everyone receives from a combination of two products. (Basically what combination of CPUs and GPUs gives people the greatest benefit)

While you can measure productive efficiency by moving to the red line, allocative efficiency is more difficult to find out as what is considered the most beneficial combination varies from person to person.

Let us say that instead of going to point A, you would like to produce point A1.

https://i.imgur.com/GSIIJPi.png

As we move from B to B1, we have to give up some GPUs in order to get the amount of CPUs we want.

This is the opportunity cost of our change from A to A1, what we have to give up in order to get what we want.

The only way to get to C is for the economy to increase the total amount of factors available, shifting to the right from A to C as a result.

If you have any questions, you can reply to this post or PM me.

See you next time!  :) :)

Any questions would be welcome!

I am just utilizing the knowledge I found via reading and watching a lot on economics!

In fact,need to analize first,50% live in earth,life status not all millionaire.Many investors,to invest any business.Now  economic problems is increasing demands of people but decrease of supply,to others to produce and manufactures for every products.Problems nowadays,unemployment of every country,more EDUCATED but available jobs is less not suitable for there courses.Economic problems,not only for money,who invest,the business,we consider also,those who supplier and producers.

I know that if you want everything to be good from an economic perspective that supports or fulfills all unlimited needs from limited resources, it depends on how the wealth management of a country is managed and the management system of cooperation with the community. If this is not in the control of the economy as a whole, even with unlimited resources, everything will feel less.

If the people themselves do not realize their potential, especially in the surrounding environment, it is the same as owning a car but not being able to drive it. Collaboration between the community and the government must be in line with the economic potential. When all have the energy to build, then no one is harmed. But that is ideal in economics, it's just that nothing is really ideal in managing sources of wealth that are profitable for certain parties.

Economic fulfillment is not only based on natural resources, but indeed we must also see how the performance of human resources in it.
it will be very natural when talking about the needs of all there will always be needs that have not been met.
on the other hand, it is true that natural resources are also very limited and it will not be possible to always exist and surely one day it will be difficult and even run out.
What I might emphasize is to return to the human resources themselves, how to manage these limited natural resources will be an advantage for them. because for me this will be very important when human resources can contribute more and are able to manage and use their resources well automatically all will prosper.
it will be a different story when human resources are weak and only rely on existing things, then natural resources that are unlimited and abundant will feel lacking and always feel dissatisfied.

Sorry for the title giving the wrong impression.

I was talking about the fundamental problem that economics was created to solve: how to distribute resources to the places where is it needed.

Alright then but has economics being able to play that role adequately? Has it been able to distribute resources equally without the influence of politics? Like you said the fundamental purpose of economics is to distribute resources but politics have been an influencing factor that has made the distribution unequally distributed. Economics is only rolling out the hypothesis, economic models but it has not operated adequately in the face of politics and corruption, lobbying.

it seems that between politics and economics can not be separated, of course the officials occupy their seats for an economy. So wherever the economy occurs, of course there is a political role behind it. An economic policy is also formed because of a politicized agreement. and most unfairly, many of the politicians put their personal interests first

The problem of economics is still happening every day and as you are suggesting that the basic goal of economics is the distribution of resources but politics has been an influencing factor making this distribution causing unemployment to increase. On the other hand, it is true that natural resources are also very limited, do not always exist and will certainly one day be scarce even exhausted. That is to say, if we have effective ways of managing human resources, it can help improve the economy and all will automatically become better towards sustainable development.

That personal interest is the point I was making out which is a reason that the formulated economic policies don't go far in problem solving. Implementation of the policies turn political and the economic policies turn to hypothesis that is locked in the library for student to read to pass exams but can't see the efficiency in the physical reality of life. This is a big difference in the policy formulated and actual performance of them. The role of the individual politician keeps standing against the economic development goals initiatives because they want to enrich themselves. When these policies are implemented, they are not completely carried out or they are not carried out at all.

You've forgotten the fourth question the economy has to answer. How will we increase the quantity of the produced products, which means how will the economy of a society grow.

It's not that bad choice. The problem you described is the main economic problem, not just the economic problem. It's the one in which every other economic problem comes from.

This is a very interesting post. I would love to follow more of these posts from you if you intend to talk about economics. You may choose the way you are going but considering that this is the bitcointalk forum, people here are pretty much aware of the basic Supply/ Demand constraints.

I will suggest that you go through the basics of monetary supply and role of fiscal/ monetary policies in economy. Then you could talk about the economic model of Bitcoin and the cryptocurrencies in general. Let us ponder on these economic questions specific to the crypto-economy.

What to Produce? Transaction services/ Investment services/ Safe-keeping/
How to Produce? Decentralized/ PoW/ PoS
Where should the output go? Founders/ Public/ DAOs/

I think the major be problem of the society based on Economics is:
What to produce...
How to produce...
Where to produce...

These had been continuous challenge for investors and business men to appropriately establish a good target and production processes that will help to achieve and solve humans' demand.

Bringing it to Bitcoin, China had been a good for Bitcoin mining but because of Chinese government enforce in banning Cryptocurrency activities, we'll need to ask ourselves of these three questions of where next will be suitable for bitcoin activities liking mining, crypto softwares production etc.

We're all dumb, we don't know how to use resources efficiently, if we were to do that, we would be able to conserve a lot of resources in the process. If the people aren't dumb, we would've elected politicians that we're fit in the first place and could've saved us a ton.

Thank you very much!

I aim to create a beginner's guide for economics for both newbies to learn and those who are more experienced to look back on.

Once the three basic questions are answered, then I agree with you that this is the next step.

See the policies of a country in managing its economy? do they have a just economic treasury goal? If not, there will be a lot of unequal economic resources that fall apart and cannot run as expected. If we want to be idealistic, then we can review the essence of economic development as a process of changing the quality of ineffective conditions to be of higher quality and can improve people's welfare.

That is what the government is for in realizing economic development. As for applying the principles of economic justice as follows:
1. The thing to note is that wealth should not be concentrated in one or two groups. In other words, the government must disseminate it to the entire community.
2. The results obtained from natural resources are divided equally.
3. Limiting the wealth obtained and the rest being distributed to those who are more in need (because every citizen has the right to be treated fairly by the government and feel the wealth owned by the state.

Therefore, every citizen has the right to feel justice which includes all sectors, religion, education, health, economy, politics and social.

If to achieve a perfect level of economy, productive human resources are the most important thing in order to be able to manage all aspects that have the potential as one that can bring the country's economy well. However, no one is truly perfect in economic fulfillment, all of them have obstacles when they always prioritize personal interests and formalities are only a cover to achieve abundant wealth.

There is nothing that can be done as long as it does not have a strong drive to advance a country economy if the government does not care about the industrial potential in an environment that has a good production level.

there needs to be awareness from all parties when talking about this because as long as humans are still greedy it will definitely stay like this.
interference from politics will always be there because with this they will benefit on the other hand they have the loopholes and power to manage this as if they were the ones who could do it.
but politics will indeed continue like this, no matter how dirty and how degrading it is, something like this will continue and will never end.

Note that there might be a delay between educational posts as it takes a long time to get these kinds of posts right.


I agree that politics has an undue influence on the economy as politicians will do anything to stay in power.

These kinds of models are simplified models: the skeleton if you will.

They are simple in order to express the idea in them (in this case, how an economy utilizes its resources).

Due to political programs various sectors of the economy have suffered and many sectors have suffered immensely it is important to know what kind of policy and other assistance needs to be provided in the respective sectors to overcome the losses. It is also necessary to give priority to the protection of any sector in such incidents in the future the economy has suffered greatly in the recent past due to political reasons economic resources cannot be properly protected without political influence.

The main problem when producing stuff is ignoring the ones without money and that is the capitalist system.
Everyone would say "why work for people who end up not paying? That is bad business" and forget that we are talking about humanity here. The first ever thing everyone should work for would be food and shelter and healthcare and education for people.

All of humanity should be working towards giving these things to EVERYONE in the world, doesn't matter if it is a very cheap and poor part of the world where it would be spending money and not getting anything back, it would still be important to provide this. Whereas today we have lambos in rich people's houses that they do not even use while there are millions who starve to death every year.

The problem of any country development start's with economy, and it's very obvious that economic problem depends or rely on the government hands, while some countries are been into economic distabilized is base on lack of economic diversification, they all channels the process of resources from one directions which is absolutely wrong from my perception, so diversification of economy will as well enhance or create a substantial development to any country, the bridges of economy is politics, this is higher figure i can say that always caused a set back to a country economy, because of lacks of management of a sector by a wrong political nominees that controls the resources of the country.

Politicians. That's the economical problem, it is the politicians but also sort of voters as well. If the voters weren't so keen on voting for the "popular" characters who might be bad presidents, and only focused on putting in the "good" politicians in, then we wouldn't have any economical problem anywhere in the world.

There are dictatorships around the world we know that much, China and Russia and north Korea comes to mind at first but I am sure there are many that are either officially or in officially dictatorship, but leaving those aside the world would have been much better if people put in place people that would be helpful to tens of millions of people in need instead of just a few thousand who are greedy. That is the economical problem that we have, fix that and you are going to fix every other thing, all the produce, all the help, everything will be done.

No, no, no.

OP referred to the main economic problem. The mentioned problem concerns every society, despite its system of government. Whether we had capitalism, communism or dictatorship we could still produce a certain amount of CPUs with a given amount of GPUs and any rise in the production of CPUs would reduce the production of GPUs if all the productive factors were fully occupied.

I like the way Lewis Mumford defined principles of capitalism and economics above.

The line about "multiplying the number of needs, factitious and fictitious, and accommodating them to the maximum mechanical capacity to produce profit" could also apply to taxes, social programs and the public sector.

Its strange how a high percentage of content published on topics like finance and economics today are formatted like a wikipedia page. They contain information and content while neglecting some of the deeper observations and conclusions which could be made. This is particularly apparent in terms of history. Where today we never seen an effort to compare current trends to previous statistics to put events into their proper context.

Isn't it strange how people today discuss "inflation" as if it were a new thing that was invented only yesterday. With zero context cited on inflation / hyperinflation in past eras of history. Most fail to acknowledge even the most basic causes of inflation. As if the goal for humanity was to forget basic fundamentals and simply parrot whatever trendy news headlines say.

Basically the conditions of need and scarcity will be part of an economic problem that continues to be complex.  The problem of this need starts from the smallest line, namely the household, to a large scale for the state.  But it's true what the OP said that there are a few key points to solve this scarcity problem.  Not only on basic needs but from other needs.