Central problems of Economy

What are the central problem of economics ?



Central problems of economy
Central problems of economy


The production, distribution and deposit of goods and services are basic economic activities of life. During these activities, every society has to face scarcity of resources. Despite this deficiency, every society has to decide how to decide the allocation of scare. Resources. This leads to the following of the central problems faced by every economy:
1. What to Produce
2. How to produce
3. For whom to produce

 these are the central problems of economics because they are the basic problems of an economy and all other problems are solved around them.

So,there are 3 main central problems of economics are :-

 1. What to produce

It is the first and most important central problem of economy. This problem involves the selection of goods and services produced and the quantity of production of each selected commodity. Each and every economy has limited resources and thus cannot produce all goods.One good or service usually means less to others.It is a problem of allocation of resources between different commodities.There are two aspects to the production problem:(I) Potential goods to produce: An economy has to decide which consumer goods and which capital goods to produce. In the same way the economy has to choose between civilian goods and munitions of war.

(ii) How much to produce: 

After deciding the goods to be produced, the economy has to decide the quantity of each item to be selected. I mean, it involves a decision about the quantity to be produced, that of the consumer and capital goods, of the citizen. Munitions and so on.
Central problems of economy
Central problems of economy


2. How to produce

It is another most important central problem of the economy and this problem involves the selection of technology used to produce goods and services. Good production can be done using various production techniques. But the technique meant that a particular combination of inputs was used. Typically, the techniques are classified: labour intensive techniques (LITs) and capital intensive techniques (CITs). Technology has been selected to achieve the objective of raising the standard of living of the people and providing employment to all.

3. For whom to produce

This is the final and important central problem of the economy and refers to the selection of the category of people who will eventually consume goods whether to produce goods for the more poor and less rich or for the more rich and less poor.


  • So these are most important central problems of economy .