These can also be referred to as basic economic questions . Sinece there are limited resources , a nation or society has to decide how to allocate its limited resources eddicientlty to produce the goods and services to satisfy the needs of the people . To do this , three fundamental conomic questions need to be answered .
What to Produce
- The economy of every nation has to take fundamental decision of what to produce because of the limited economic resources . Every society must choose the type and the quantity of goods and services tht it will produce . Should more computes be produced than radios ? Should more clinics be built than schools ? How many cars should be produced ? The problem of what to produce is solved in different wats in different economic systems . In a captitalist economy , this problem is solved through the price mechanism , which reflecs consumers; taste and preferences . In a socialist system , it is solved by the Central Planning Authority .
How to Produce
- This refers to the cheapest method of production . There are alternative techniques of producing goods and services . Should farmers use traditional ways to harvest ?Should factories use more human power or robotics to produce goods ? Should cars be produced by automatic machines or assembly line workers ?
For WHom to Produce
- This referes to distribution . Distribution of economic benefits depends on the distribution of income . How is the national income distributed ? Who will drive the latest model of an imported car ? How much will pensioners receive ?
These three basic economic problems are solved differently in different economic systems . See economic systems .
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