Major Economic Problems

Meaning of economic problem: In view of scarcity means at our disposal and multiplicity of ends we seek to achieve, the economic problem lies in making the best possible use of our recourses so as to get maximum satisfaction in the case of the customer and maximum output or profit for the producer. Hence economic problem consist in making decision regarding the ends to be perused and the goods to be produced and the means to be used for achievement of certain ends.

  • Fundamental Problem facing an economy

Following are the fundamental problem, which an economy has to tackle;

  • What to produce: The first major decision relates to the quantity and the range of goods to be produced. Since recourses are limited, we must choose b/w different alternative collection of goods and services that may be produced. It also implies the allocation of recourses b/w the different types of goods, e.g. customer goods and capital goods.

  • How to produce: When you decide the quantity and types of goods to be produced. We must next decide the techniques of production to be used e.g. labour intensive or capital intensive.

  • For whom to produce: This means how the national product is distributed I- who should get how much. This is the problem of sharing of national product.

  • Are the recourses economically used: This is the problem of economic efficiency or welfare maximization. There is to be no waste or misuse of recourses since they are limited.

  • Problem of full employment: Fullest possible use must be made of the available recourses. In other words, an economy must endeavor to achieve full employment not only of labour but of all its recourses.

  • Problem of growth: Another problem for an economy is to make sure that it keeps expanding or developing so that it maintain conditions of stability. It is not to be static its productive capacity must continue to increase. It is an under developed economy, it must accelerate its process to growth.