Basic Economic Problems

Economics

If resources are abundant and wants are
so few, then there would be no economic
problem. But this situation can never exist. Resources are always scarce and our wants are numerous.Hence in everysociety certain choices have to be made.

What and how much to produce?
Every society must decide on what goods it will produce are and how much of these it will produce. In this process, the crucial decisions include:

a.Whether to produce more of food,clothing and housing or to have more luxury goods
b. Whether to have more agricultural goods or to have industrial goods and services
c. Whether to use more resources in education and health or to use more resources in military services
d. Whether to have more consumption goods or to have investment goods
e. Whether to spend more on basic education or higher education

How to Produce?
Every society has to decide whether it will use labour-intensive technology on capital
intensive technology; that is whether to use more labour and less more machines and vice versa.

For whom to produce?
Every society must also decide how its produce be distributed among the different sections of the society. It must also decide who gets more and who gets less. It should also decide whether or not a minimum amount of consumption be ensured for everyone in the society. Due to the scarcity of resources, a society faces the compulsion of making choice among alternatives. It faces the problem of allocating the scare resources to the production of different possible goods and services and of distributing the produced
goods and services among individuals
within the economy.

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