Central Problem of an Economy

Central problem of an economy: It is the problem which has to be faced to every economy whether the country is vibrant or stagnant, rich or poor, developed or backward because resources are limited and demand for resources is unlimited,resources have their alternative uses due to which problem of choice arises.
It has three dimensions:
1-What to produce?
2-How to produce?
3-For whom to produce?

1-What to produce: This is the problem of choice of goods. It has also two dimensions.
    a-What goods to be produced?
    b-In what quantity goods to be produced?
In every economy there are two types of goods, consumer goods (consumption goods like Icecream etc) and capital goods (producer goods like machines etc). If we put all resources to produce capital goods then our future will be good but currently we will suffer lack of consumer goods,and if we put all resources to produce consumer good then our present generation enjoy but our future generation will trouble.

2-How to produce: It is a problem of choice of technique, there are two types of technique of production.
    a-Labour intensive technique
    b-Capital intensive technique
Labor intensive technique means more labour and less capital is use to produce. This technique generates more employment in the economy but cost of production tends to be high, more time is required thus efficiency is decreased.
Capital intensive technique means more capital and less labour is use to produce. This technique reduces cost of production,less time is required thus efficiency is high but it affects the employment of the economy.
Ex:We have to send 10 people from one place to another place suppose 5 Kms.
a-If we use Rickshaw (Pulled by humans) then at least 5 people will employed, It will take more time, cost of travel will high thus less efficient. (Labour intensive)
b-on the other hand if we use Auto Rickshaw then maximum 1 person will be employed but cost and time of travel will be less thus more efficient. (Capital intensive)

3-For whom to produce: This is the problem of distribution of income. In every economy there are two category of people rich and poor. If goods are produced for rich then the profit of the producer will high thus investment increases which leads to GDP growth but poor will suffer. 
On the other hand if goods are produced for poor then the profit of the producer will low thus investment tends to fall which leads to GDP shrink.

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