What is the fundamental problem of a country
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Fundamental Problems of an Economy
From the study of the essential processes of an economy, it would appear that some fundamental problems arise whatever the type of the economy.
An economy exists because of two basic facts: Firstly human wants for goods and services are unlimited; and secondly, productive resources with which to produce goods and services are scarce.
Wants being unlimited and our resources being limited, we cannot satisfy all out wants. That being so, an economy has to decide how to use its scarce resources to give the maximum possible satisfaction to the members of the society.
Whatever the type of the economy or economic system, these problems have to be solved somehow. Whether it is a capitalist economy of the U.S.A. or a socialist economy of the U.S.S.R. or a mixed economy of India, every economy has to make decisions in regard to what, how and for whom to produce. These problems are basic and fundamental for all economies.
However, different economies may solve these problems differently. For instance, the socialist economy of Soviet Russia tackles these problems in a different way from that of capitalist America. We shall now explain each of the above three problems in some detail.
(i) WHAT to Produce:
The problem ‘what to produce’ can be divided into two related questions. First, which goods are to be produced and which not; and second, in what quantities those goods, which the economy has decided to produce, are to be produced. If productive resources were unlimited we could produce as many numbers of goods as we liked and, therefore, the question “What goods to be produced and what not” would not have arisen. But because resources are in fact scarce relative to human wants, an economy must choose among different alternative collections of goods and services that it should produce.
HOPE IT HELPS U....
Fundamental Problems of an Economy
From the study of the essential processes of an economy, it would appear that some fundamental problems arise whatever the type of the economy.
An economy exists because of two basic facts: Firstly human wants for goods and services are unlimited; and secondly, productive resources with which to produce goods and services are scarce.
Wants being unlimited and our resources being limited, we cannot satisfy all out wants. That being so, an economy has to decide how to use its scarce resources to give the maximum possible satisfaction to the members of the society.
Whatever the type of the economy or economic system, these problems have to be solved somehow. Whether it is a capitalist economy of the U.S.A. or a socialist economy of the U.S.S.R. or a mixed economy of India, every economy has to make decisions in regard to what, how and for whom to produce. These problems are basic and fundamental for all economies.
However, different economies may solve these problems differently. For instance, the socialist economy of Soviet Russia tackles these problems in a different way from that of capitalist America. We shall now explain each of the above three problems in some detail.
(i) WHAT to Produce:
The problem ‘what to produce’ can be divided into two related questions. First, which goods are to be produced and which not; and second, in what quantities those goods, which the economy has decided to produce, are to be produced. If productive resources were unlimited we could produce as many numbers of goods as we liked and, therefore, the question “What goods to be produced and what not” would not have arisen. But because resources are in fact scarce relative to human wants, an economy must choose among different alternative collections of goods and services that it should produce.
HOPE IT HELPS U....
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