There are 3 basic economic problems that every society faces: 1) What to produce and in what quantities, which depends on society's priorities and preferences between consumer goods now versus capital goods and consumer goods in the future. 2) How to produce goods, which is primarily dependent on the availability of resources and the type and quantity of goods to be produced. It also involves allocating scarce resources efficiently. 3) For whom to produce goods, as the distribution of income determines who will get what is produced, with the rich getting luxurious goods and the poor getting more of life's basic necessities.

1. BASIC ECONOMIC
PROBLEMS

2. The 3 Basic Economic Problems
1) What to produce & in what quantities?
2) How to produce goods?
3) For whom to produce goods?

3. What to Produce & in what Quantities?
•Deciding the nature of goods.
•Determining their quantity.
•Production depends upon society’s priorities and
preferences.
•If the society gives priority to the production of
more consumer goods now, it will have less in the
future.
•A higher priority on capital goods implies less
consumer goods now and more in the future.

4. How to Produce Goods?
•Deciding the techniques or methods to be used in
order to produce the required goods.
•Primarily dependent upon the availability of
resources within the economy.
•The technique to be used also depends upon the
type and quantity of goods to be produced.
•Allocating the resources while keeping in mind
their scarcity.
•What goods and services are to be produced in the
public sector and what in the private sector.

5. For whom to Produce Goods?
•Distribution of income determines who will be
getting what produced.
•Whosoever possesses the means to buy the goods
may have them.
•A rich person may have a large share of the
luxurious goods, and a poor person may have more
quantities of the basic consumer goods he needs.