central problems

Central Problems of an Economy   

 All economies face some central problems. We have seen the basic economic problem that arises from a mismatch between unlimited wants and limited resourses. This mismatch gives rise to three central problems faced  by economies. This mismatch gives rise to problem of allocation of resourses. 

 The problem of allocation of resources :- Since wants are unlimeted and resources are limited. it is not possible to satisfy all wants.  further more,  the scarce resources have alternative applicability. Therefore, the resources have alternative applicability. therefore, the resources have to be properly allocated. This involves taking  decisions regarding what to produce and in what quantities, how to produce and for whom to produce.

    (a) What to produce and in what quantities?

    (b) How to produce?

    (c) For whom to produce?