What is the basic economic problem that every society faces?

The basic economic problem that every society faces is scarcity. Scarcity refers to the fundamental issue that resources are limited while human wants and needs are virtually unlimited. This imbalance creates a necessity for choices to be made regarding how to allocate those limited resources effectively. In every economy, individuals, businesses, and governments must decide what to produce, how to produce it, and for whom it will be produced, all of which stem from this underlying challenge of scarcity.

Scarcity affects economies at all levels, influencing everything from individual choices to national economic policies. It drives the concept of opportunity cost, which represents the value of the next best alternative that is foregone when a choice is made. In addressing scarcity, societies must prioritize their needs and wants, leading to trade-offs and the necessity of making informed economic decisions.