Question

Why does the problem of choice arise for producer and for consumer?

Answer 1

 

An economic problem is basically the problem of choice which arises because of scarcity of resources. Human wants are unlimited but means to satisfy them are limited. Therefore, all human wants cannot be satisfied with limited means. Wants differ in intensity and limited resources have alternative uses. In such a background, every consumer tries to satisfy his maximum wants. Therefore, one has to choose as to what goods one should consume and in what quantity. Economic problem arises the mo­ment problem of choice arises. Actually speaking, economic problem is basically the problem of choice.

Due to scarcity of resources, the problem which arises before an individual consumer also arises collectively before an economy. On account of scarcity of resources, an economy has to choose between the following:

(i) Which goods should be produced and in what quantity?

(ii) What technique should be adopted for production?

(iii) For whom goods should be produced?

These three problems are known as the central problems or the basic problems of an economy. This is so because all other economic problems cluster around these problems. These problems arise in all economies, whether it is socialist economy like that of China or a capitalist economy like that of America.

From the above analysis, it is clear that an economic problem arises because of the following causes:

Answer 2

Answer:

The central problems of production deals with production of necessary commodities using scarce means of resources. It includes problems that deal with the production of goods in an economy where it is decide that

What to produce? Consumer goods or capital goods?

How to produce? Using labour or capital?

For whom to produce? Rich people or poor people?

The central problems of the economy arises because the resources in the economy are scarce and human wants are unlimited. Therefore, there is need for an efficient relationship between both the factors.

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