Question

State the central problems of an economy. Why do they arise?

Answer 1

The central problems of production deals with production of necessary commodities using scarce means of resources. It includes problems that deal with the production of goods in an economy where it is decide that

• What to produce? Consumer goods or capital goods?
  
• How to produce? Using labour or capital?
  
• For whom to produce? Rich people or poor people?
  

The central problems of the economy arises because the resources in the economy are scarce and human wants are unlimited. Therefore, there is need for an efficient relationship between both the factors.