Question

explain the central problems of an economy?

Answer 1

Some of thecentral problems that are faced by every economy of a country are as follows: Production, distribution and disposition of goods and services are the basic economic activities of life. In the course of these activities, every society has to face scarcity of resources.

Answer 2

ANSWER:

What to produce, how to produce, and for whom to produce.

EXPLANATION:

    What to produce (choosing from various potential bundle of goods), how to produce (selecting from different production techniques), and for whom to produce (deciding in the end as to who would consume these goods) are the central problems of an economy since these are the rudimentary problems of any economy and other problems are centered on them.

   These problems are scrutinised "under the problem" of resource allocation. Allocation of resources means the problem of allocating scarce resources such that maximum needs of the society are satisfied. As resources are limited with regard to the limitless needs, it is essential to economise their use and utilise them in the most effectual way.