Question

Explain functions of an economy.

Answer 1

Instructions:

• Need for an economy.

Solution:
Functions of an economy are:

1. Deciding on what goods to produce. For example, whether to produce foodgrains on a piece of land or use that land to build factories to produce military equipments.
2. Deciding on how to produce and how much to produce? For example, whether to use labour in the production activities or use machines. Also, how much to produce to sustain the needs of the country.
3. Deciding on for whom to produce. For example, whether to produce goods and services which are needed for national security or to produce goods and services to fulfil the needs of citizens.
4. To ensure the available resources are used judiciously and optimally by minimising cost and maximising benefits.
5. To ensure that all economic activities leads to growth and development of the country. It is ensured by distributing the nation's income for social and economic welfare of all the citizens.