Question

2) Explain the function of an economy.​

Answer 1

Heya,

An economy is the large set of inter-related production and consumption activities that aid in determining how scarce resources are allocated. In an economy, the production and consumption of goods and services are used to fulfill the needs of those living and operating within it.

Answer 2

Functions of an Economy:-

• What goods and services are to be produced? This is called ‘allocation problem’.
• How are these goods and services produced? This is called ‘production problem’.
• For whom are these goods and services produced? This is called ‘distribution problem’.
• Are the country’s scarce resources being fully utilized or are some of them lying idle? This is the problem of ‘resource utilization’.
• Is the productive capacity of an eco­nomy growing or remaining static over time? This is known as the ‘problem of economic growth’.

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