Basic economic problems are the challenges facing an economy today due to the scarcity of resources. These problems are common to all economies in the world and are also known as the central problems of economies. These problems originate from the fundamental issue of scarcity – the imbalance between unlimited human wants and the limited available resources.

Scarcity is the tension between the unlimited human wants and the means of satisfying them. The fundamental economic problem focuses on this mismatch between the unlimited human wants and the limited means of satisfying those wants. Consequently, much of the human effort in any society is directed towards the production of goods and services in order to satisfy the demand of the society.

The Production Possibility Curve (PPC) is a graphical representation that depicts all possible combinations of the maximum output that can be produced in an economy with given resources and technology. The PPC describes the concepts of scarcity, choice, and opportunity cost. Linked to the opportunity cost, there is a law known as the law of increasing opportunity cost, which states that as we produce more and more of a product, the opportunity cost per unit of the additional output increases. This makes the shape of the PPC concave to the origin.

The way a society tries to answer the basic economic questions is summarized by the concept of an economic system. An economic system is a set of organizational and institutional arrangements established to address the fundamental economic questions of what to produce, how to produce it, and for whom to produce it. In economics, there are four basic economic systems: traditional, capitalist, command, and mixed economies.