1.1This essay will explain the basic economic problem and the types of economic systems used to solve the economic problem. This essay will also include an explanation of the current structure of the private and public sectors of the UK economy as well as the competitive environment in which organizations operate and how this impacts their behavior. Using business examples, the importance of elasticity for business organizations will also be explained. The economic problem is a theory that only limited and insufficient resources are available to satisfy people's needs and wants. There are never enough resources to produce everything everyone would like to produce. Many people will have to go without some things they need. Conversely, they make choices that offer the lowest opportunity cost. The economic problem is that resources are scarce compared to the objectives to which they could be devoted. (Bized, 2012) Therefore, choices must be made about how to use resources. Another term for the economic problem is “scarcity and choice.” Money may not be a solution to the economic problem. However, to some extent this is the case, if it is used as capital for investments. The fundamental economic problem is that resources are scarce, but on the other hand, our needs are infinite. Resources are classified into four categories. These are resources of the Earth, of Labor, which include all the human, mental and physical efforts necessary for production; Capital, which includes all equipment, machinery and buildings that are not used for their own sake; and finally, the Enterprise, which includes the skills necessary to organize other resources into some form of production. Society must consider the most obvious needs to produce or...... middle of paper ....... (Answers, 2012) Businesses often strive to sell/market products or services whose demand is or appears inelastic, as this may mean that few customers will be lost due to price increases. The elasticity of demand shows how many more units of a product will be sold when the price falls or how many fewer units will be sold when the price rises. Companies would like to increase their unit sales, but do not want to reduce prices because it could reduce profits. So they look for ways to reduce prices for customers who will only buy at lower prices. (Answers, 2012) But they try to keep prices higher for customers who will pay those higher prices. For example, some price elastic goods are coffee, money, jewelry, hamburgers, lottery tickets, computers, televisions, CDs, etc. Some price inelastic goods are museum tickets, salt, gasoline, medicine, food, etc...