what are the three central problems of an economy ? why do they arise ?
Answers
Answer:
The central problems of an economy is the production of goods and services, its distribution and indisposition/sales. these problems arise mainly due to unavailability/scarcity of resources which affects all the above systems.
Answer:
The three major central problems of an economy are:
a. What to Produce: It involves deciding the final combination of goods and services to be produced, ie, it involves selection of goods and services and the quantity of each, that the economy should produce.
b. How to Produce: It involves deciding the technique of production, ie; whether selected goods be produced, with more labour and less capital (known as Labour Intensive Technique) or with more capital and less labour (known as Capital Intensive Technique).
c. For whom to Produce: It involves deciding the distribution of output among people, ie; it involves selection of the category of people who will ultimately consume the goods.
The central problems of the economy arises because the resources in the economy are scarce and human wants are unlimited.