THINK ABOUT CENTRAL PROBLEMS OF AN ECONOMY..!!

          CENTRAL PROBLEMS OF AN ECONOMY              

Hello friends ,today i came with the new blog on the topic of "Central Problem of an Economy"

which is a basic part of economics and due to this problems the economics subject is created to 

tackle it.So it is very important to understand about those problem which was influance to us 

to study economics.

INTRODUCTION

Due to unlimited wants and limited resources problem,problem of choice arises in the economy these problems are reffered as the central problem of economy.

Causes of central problems:

* Human wants are unlimited .

* Resources are limited in nature.

* Resources have alternative uses.

Types of central problems:

*What to produce:

The first basic problem with the economy is to decide what to produce and in what quantities. Resources are limited in nature so,the economy cannot produce all goods and services as per her wishes .So,under this problem an economy has to decide what to produce more capital good or more consumer goods , more luxurious goods or more necessities goods.

*HOW TO PRODUCE:

After deciding what to produce the next central problem with the economy is to decide how to produce.

There are two method of production:

* Labour intensive technique.

* Capital intensive technique.

* In labour intensive technique more employment opportunities are generated but there is less production.

*In capital intensive technique there is huge production but employment opportunities are less.

So,according to the availability of resources and given technology, an economy has to choose most appropriate method of production.

*FOR WHOM TO PRODUCE:

This central problem is basically related with the distribution of national income to different factors of production in the form of land to rent, profit to enterprenure ,intrest to capital.If the economy is decided to produce more of masses goods then national income will be distrabuted more equally to different section of society. On the other hand if the economy has decide to produce more luxurious good then national income is distrabuted more in the favour of richer section. So there will be unequal distribution of income.

conclusion

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