Question

10. What are the three main central problems of an economy?

Answer 1

1) Which goods should be produced and in how much quantity ?

2) What technique should be adopted for production ?

3) For whom goods should be produced ?

Answer 2

Answer:

The three major central problems of an economy are:

a. What to Produce: It involves deciding the final combination of goods and services to be produced, ie, it involves selection of goods and services and the quantity of each, that the economy should produce.

b. How to Produce: It involves deciding the technique of production, ie; whether selected goods be produced, with more labour and less capital (known as Labour Intensive Technique) or with more capital and less labour (known as Capital Intensive Technique).

c. For whom to Produce: It involves deciding the distribution of output among people, ie; it involves selection of the category of people who will ultimately consume the goods.