Scribd Logo
Upload

Welcome to Scribd!

  • 45 views

    The Basic Economic Problem

    Uploaded by

    Shivam Kohli
    The basic economic problem is that resources are scarce while needs and wants are unlimited. This forces every economy to make important decisions about what to produce, how to produce it, and who will consume it. Specifically, economies must determine which goods and services to prioritize for production given limited resources, choose appropriate production methods and technologies, and decide how goods and services will be distributed among the population for consumption. How an economy approaches solving these three basic problems depends on whether it follows a market, planned, or mixed economic system.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    The Basic Economic Problem

    Uploaded by

    Shivam Kohli
    45 views2 pages
    The basic economic problem is that resources are scarce while needs and wants are unlimited. This forces every economy to make important decisions about what to produce, how to produce it, and who will consume it. Specifically, economies must determine which goods and services to prioritize for production given limited resources, choose appropriate production methods and technologies, and decide how goods and services will be distributed among the population for consumption. How an economy approaches solving these three basic problems depends on whether it follows a market, planned, or mixed economic system.

    Original Description:

    The Basic Economic Problem

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The basic economic problem is that resources are scarce while needs and wants are unlimited. This forces every economy to make important decisions about what to produce, how to produce it, and who will consume it. Specifically, economies must determine which goods and services to prioritize for production given limited resources, choose appropriate production methods and technologies, and decide how goods and services will be distributed among the population for consumption. How an economy approaches solving these three basic problems depends on whether it follows a market, planned, or mixed economic system.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    45 views2 pages

    The Basic Economic Problem

    Uploaded by

    Shivam Kohli
    The basic economic problem is that resources are scarce while needs and wants are unlimited. This forces every economy to make important decisions about what to produce, how to produce it, and who will consume it. Specifically, economies must determine which goods and services to prioritize for production given limited resources, choose appropriate production methods and technologies, and decide how goods and services will be distributed among the population for consumption. How an economy approaches solving these three basic problems depends on whether it follows a market, planned, or mixed economic system.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    You are on page 1of 2

    The Basic Economic Problem[edit]

    "Economics is the study of the division of scarce resources between unlimited needs and wants"
    Let us explain further. You are the head of your household. There are several things which are
    needed to keep the household running, e.g. food, electricity, gas and so forth. There are also
    wants, which may not have to be fulfilled per se, but will be acquired somehow.
    A store manager has a limited budget to spend on various wants, his resources are scarce. He
    could spend his money on providing more staff, bringing in more stock from a wholesaler,
    marketing his product to increase demand through advertising, decorating or improving his store
    and paying for essential services like water and electricity. Effectively he has unlimited wants but
    limited means or resources. We say that his resources are scarce. The store manager
    must economise by choosing to use his resources to satisfy certain wants such as marketing
    instead of others like stock purchase. As earlier stated, economics is the study of the division of
    these resources to best satisfy the unlimited wants.
    Every economy in the world face three main basic economics problems because the needs and
    wants of the society are unlimited but the resources available to satisfy those are limited.
    Whether a country is rich or poor this is a common situation to all of them. The main economics
    problem are:

    1. What to Produce in which quantities?


    2. How to Produce?
    3. For whom to Produce?
    Lets look at the problems in details.

    What to produce ?[edit]
    In any society there are unlimited wants but resources are limited or resources are scarce. And
    these resources have alternative uses. Due to this each society has to decide what they are to
    produce using these scarce resources. So each economy has to make choice by thinking what
    kind of products or what quantity is to be produced. For example a economy has to decide
    whether to produce more services such as transport or hospitals, or consumable goods like more
    clothes and houses or more capital goods such as roads, buildings etc. The economy must
    decide which goods and services to produce and which goods and services to exclude from
    production is the problem of choice between commodities(by wabi)

    How to produce?[edit]
    The problem of ‘how to produce’ means which combination of resources is to be used for the
    production-of goods and which technology is to be made use of in production. Once the society
    has decided what goods and services are to be produced and in what quantities, it must then
    decide how these goods shall be produced. There are various alternative methods of producing
    a good and the economy has to choose among them. For example, cloth can be produced either
    with automatic looms or with power looms or with handlooms. Fields can be irrigated (and hence
    wheat can be produced) by building small irrigation works like tube-wells and tanks or by building
    large canals and dams. Therefore, the economy has to decide whether cloth is to be produced by
    handlooms or power looms or automatic looms. Similarly, it has to decide if the irrigation has to
    be done by minor irrigation works or by major works. So Obviously, it is a problem of the choice
    of production.

    For whom to produce?[edit]


    Once an economy has produced goods and services, it also has to decide who will consume
    those goods. This will be decided by different way by the nature of the economy.
    Though the above three problem are common to each economy, an economy can take different
    approaches to solve these basic economics problems, and depending on the approach
    economies are organised in different way. This is why we find different economies such as
    market economy, centrally planned economy and mixed economy and so forth.

    Another Perspective[edit]
    Think about why you get up in the morning.
    What motivates you to get out of bed? Eat food? Work? Dance? Make friends? Fear of
    starvation, failure or ridicule?
    We are concerned with both the value of doing any given thing as well as the value of not doing
    any given thing (known hereafter as opportunity cost). Economics comes down to one idea,
    happiness.
    Economics is the quantitative and eventual qualitative description of every human activity in our
    world. By studying economics you are analysing rational behavior to a higher degree than the
    level that we live by in our daily lives.

    You might also like