Welcome, Guest: Join Nigeria Student Forum / Login / Trending Now / Recent

Stats: 17,241 members, 67,453 Topics, 15,140 Comments. Date: May 20 2019, 8:02 pm

QUESTION: Four Basic Problems Of An Economy [Solved]

Nigeria Student Forum / Questions / Economics / Four Basic Problems Of An Economy

(Go Down)
Answered: Four Basic Problems Of An Economy 5:34pm on March 6
Fadeyi Oluwaseun
Ladoke Akintola University Ogbomosho
B.tech Marketing Management
200Level, Nigeria.

1 – What to Produce?
What does a society do when the resources are limited? It decides which goods/service it wants to produce. Further, it also determines the quantity required. For example, should we produce more guns or more butter? Do we opt for capital goods like machines, equipment, etc. or consumer goods like cell phones, etc.? While it sounds elementary, a society must decide the type and quantity of every single good/service to be produced.

2 – How to Produce?
The production of a good is possible by various methods. For example, you can produce cotton cloth using handlooms, power looms or automatic looms. While handlooms require more labor, automatic looms need a higher power and capital investment.

Hence, a society must choose between the techniques to produce the commodity. Similarly, for all goods and/or services, similar decisions are necessary. Further, the choice depends on the availability of different factors of production and their prices. Usually, a society opts for a technique that optimally utilizes its available resources.

3. For whom to Produce?
Think about it – can a society satisfy each and every human wants? Certainly not. Therefore, it has to decide on who gets what share of the total output of goods and services produced. In other words, the society decides on the distribution of the goods and services among the members of the society.

4 – What provision should be made for economic growth?
Can a society use all its resources for current consumption? Yes, it can. However, it is not likely to do so. The reason is simple. If a society uses all its resources for current consumption, then its production capacity would never increase.

Therefore, the standard of living and the income of a member of the society will remain constant. Subsequently, in the future, the standard of living will decline. Hence, a society must decide on the part of the resources that it wants to save for future progress.

Source: https://www.toppr.com/guides/business-economics/introduction-to-business-economics/basic-problems-of-an-economy/

0 UpVote

Don't have an account? Use the form below to signup for a Nigeria Student Forum Account and start Asking questions and get answers on this category

Full Name:
Username: E.g Seuncoded
Confirm Password:

I agree to the terms of service

Viewing this question:
1 guest viewing this topic
Download the Ngstudentforum app for Android Devices

Disclaimer: Every Nigeria Student Forum member is solely responsible for anything that he/she posts or uploads on Nigeria Student Forum.
- Copyright © 2016 - 2019. All rights reserved.
For enquiries & feedbacks send email to: Ngstudentforum@gmail.com