What are the central problems of an economy and why do they arise 1?
Answers
1 What to produce .....( this have the problem of choice what is to be produced and in which quantity )
2 How to produce..... ( by labour intensive or capital intensive technique)..
3 For whom to produce... ( for rich or poor sector and also problem of choice in case of income distribution)....
Economic problems are the problems of choice or optimum utilization of scare Resources arises out of the fact that...
1 resources are scare...
2 resources have alternative uses.
3 human wants are unlimited...
Hope it helps u.....
Hey there!
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Answer -:
The central problems of an economy are as follows -:
(i) What to produce?
An economy has millions of commodities to produce. It has to decide whether to produce luxury goods or wage goods or it may have to decide between capital goods and consumer goods and so on. Having decided what to produce, it also has to decide how much to produce.
(ii) How to produce?
The next choice is the choice of technique of production. Every economy faces the problem of as to how resources should be combined for production of a given commodity. Depending upon the abundance of a particular resources, an economy may choose between labour intensive and capital intensive techniques.
(iii) For whom to produce?
What goods should be consumed and by whom depends upon how national product is distributed among people/factor owners.
All central problems arise due to scarcity of resources having alternative uses.