Failure to address the three questions of economics will have what kind of impact on an economy?
Answers
The three main questions referred to in the question above, are the questions regarding the resource allocation and production system in an economy.
For any economy these following three questions are crucial:
- What to produce?
- How to produce?
- For whom to produce?
These questions bascially talks about the concept of resource allocation in an economy. Whether it may be planned or a free market economy these questions are imporatant and need to be answered.
If there is failure to answer these questions then that may lead to problems with choice factor, the public will be confused. This way the government wont be able to do cost benefit analysis and work for the welfare of public. There will be limited choice or no choice at all. If there is no assurity there is no guarantee that any public goods would get produced.
There will be a chaos in the production system, and negative affecting goods might be produced due to lack of decision making and knowledge.
There wouldnt be any clarity and the consumers and producers both will be very confused as to their roles in the economy.
Broadly, the three most important questions for an economy, are the following:
What to produce?
How to produce?
When to produce?
These three critical questions have to be addressed correctly and policies formulated, for implementing actions, to arrive at the most satisfactory results.
An economy has to be carefully focussed on its core products and find ways and means of fine-tuning production, to produce the optimum quantity at minimum cost. Production for domestic consumption and for exports, have to be carefully planned to avoid shortages and break in supply chain or pile up of excess stocks.