Question

what are the 3 central problems of economy
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Answer 1

Answer:

It is basically the problem of selection of commodities and their quantities to be produced. There is a limited resource, and thus producers can’t produce all the goods, in an economy.

So, every economy has this problem that what to produce and in what quantities. It has two dimensions.

(a) Kinds of goods to be produced

(b) Quantity of goods to be produced

How to produce: this problem refers to the selection of technique to be used for the production of goods and services.

There are various techniques available to produce goods.

(a) Labour Intensive Technique (greater use of labour)

(b) Capital Intensive Technique (greater use of machines)

Choice of technique mainly depends upon the availability of resources, structure of economy and policies of the government. Thus it is difficult to allocate the resource efficiently and effectively.

For whom to produce: Due to lack of resource in every economy, can’t satisfy all the wants of its people. So, there is a problem to select the category of people who consume the goods. Whether to produce goods for the rich section or poor section of society or more for rich and less for the poor section.

The allocation of scares resources and the distribution of the final goods and services are the central problem of the economy.

Answer 2

$\bf \pink {Central\:problems\:of\:economy-}$

The three central problems of an economy are -

$\bf \green {What\:to\:produce?}$

$\bf \green {How\:to\:produce?}$ And

$\bf \green {For\:Whom\:to\:produce?}$

We know that scarcity of resources is a universal problem because resources are limited but human wants/desires are unlimited.

This is an unavoidable problem that can only be managed and can never be solved.

So, the subject matter of economics revolves around the main problem of rational management of resources.

$\bf \blue {What\:is\:Central\:problem\:of\:an\:economy?}$

The problem of making choices among alternative use of resources or basic is called as Central problem of an economy.

$\bf \pink {What\:to\:produce?}$

Here, the firm has to decide what kind of goods are to be produced. Whether it will be consumer goods or capital goods.

$\bf \pink {How\:to\:produce?}$

Here the firm has to decide about two different techniques of production.

• Labour intensive technique.

• Capital intensive technique.

$\bf \pink {For\:Whom\:to\:produce?}$

It depends on the different classes of the society. If rich or luxurious products are in more demand in a society that consists of rich class people the firm would like to produce more and more such goods which are highly costly and luxurious. But if the society is a mix of poor families middle class families and rich ones then the firm will decide to produce such goods which are more in demand in the market.