Overview
The economic problem is most simply explained by the question: "How do we satisfy unlimited wants with limited resources?" The premise of the economic problem model is that wants are constant and infinite due to constantly changing demands (often closely related to changing demographics of the population), but resources in the world to satisfy human wants are always limited to the amount of natural or human resources available. The economic problem—and methods to curb it—revolve around the idea of choice in prioritizing which wants can be fulfilled and what to produce for the economy.
Opportunity cost is the loss in terms of potential benefit had another action been taken. We make choices every day. We have to, as we have limited resources but so many wants. We therefore must decide which wants to satisfy and which not to. All choices involve giving something up. This leads to opportunity cost. This problem of 'what to give up' exists not only for consumers like us but for governments and businesses too.