CENTAL OR BASIC PROBLEMS OF AN ECONOMY

BASIC OR CENTRAL PROBLEMS OF AN ECONOMY

 Central Problems that are faced by every Economy

•       WHAT TO PRODUCE
•  
•       HOW TO PRODUCE
•       FOR WHOM TO PRODUCE
•       PROBLEM OF FULLER UTILIZATION OF RESOURCES
•       THE PROBLEM OF GROWTH
•       PROBLEM OF EFFICIENCY

THESE ARE THE PROBLEMS THAT AN ECONOMY FACE AND THE ABOVE THREE ARE THE MAJOR PROBLEMS. THESE PROBLEMS ARE DISCUSSED BELOW .

1.       WHAT TO PRODUCE:  this is the first problem that an economy face . The economy has to face that what type of commodities is to produce its because he  has  a limited resources  and the economy want to fully utilize of all these resources. So the first question arises that what type of goods is to produce  e-g civil goods , war goods, consumption goods, capital goods, (the definition of these goods are discussed below) , the first problem that an economy face is  what commodity is to produce.

2.       HOW TO PRODUCE: This is the second problem that an economy face, suppose an economy choose that what type of commodity he wants to produce, now the question arises how to produce that commodity, and what technique to used, weather to use Labour-intensive technique or Capital-intensive technique, this problem arises because there are number of ways by which goods is to be produced.

Labor intensive technique ; It is the technique where we use large portion of labour as compared to the capital(machines) its called Labour-intensive technique.

Capital-intensive technique: it is the technique where we use large portion of capital (machines) as compared to the labour its called the Capital-intensive technique.

So the economy face that problem its because the economy wants the best results of these

3.   FOR WHOM TO PRODUCE : Suppose an economy has to decide that he wants to produce and how to produce that commodity now the problem arises for whom to produce means decision, as we know that in order to produce that commodity the economy use different factors of production just like Land , Labour and Capital  so the output of production should be distributed among these factors of production. Now the question arises how to distribute that out among these. That’s the third problem that an economy face.

These are the main three problems that an economy face, there is also the other problems like Problem of Efficiency , Problem of Allocation of resources , Problem of Growth but the above three problems are the main problems of an economy .

• Civil goods just like cloths, radio, watches,shoes etc that are uses for the civil perpose
• War goods just like  guns, fighting aircrafts , machine guns, bomb etc
• Consumption goods like cloths,,shoes, tea , suger,etc that are consuming means that doesn't remain for a long time.
• Capital goods like machines, tractor, plane means those that remain for a long time.