2. What are basic economic problems?
2
Are also called central/fundamental economic
problems
The economic problems arise due to two main
reasons.
Human wants are unlimited
But means to satisfy wants are limited
In other words due to scarcity of resources.
3. What are the basic economic
problems?
3
What in what quantity to produce?
How to produce?
For whom to produce?
4. What in what quantity to produce?
4
This is a problem of resource allocation
Decide what goods to produce
Determine or estimate the demand of products
to be used in production decisions so that
resources are not wasted or over used
5. How to produce?
5
Deciding the means of production
This is a production problem
Deciding the method or technique of
production
Either labour intensive method
Or capital intensive method
6. For whom to produce?
6
This is a distribution problem
A product can be targeted at poor people
Or rich people
Or entire community
7. Static efficiency
7
Static advantage occurs when an economy is
able to solve all 3 basic economic problems in
an efficient way at once
8. Dynamic efficiency
8
Dynamic advantage occurs when all three basic
problems are optimally solved over a long
period of time.
If the economy achieves static efficiency over
a period of time then it is dynamically efficient
