BASIC ECONOMIC PROBLEMS/ QUESTIONS

BASIC ECONOMIC PROBLEMS/ QUESTIONS. 1. What to produce? -What goods and services (G&S) will be produce? It depends on market demand of goods and services In this case, the producer must ensure the sufficient production of every type of goods to fulfill the wants of the economy as a whole. However, due to limited resources not all goods demanded can be produced. Therefore, government intervention is needed to ensure the production of essential goods for society..

2. How much to produce? - How much the G&S be produced? To overcome this problem, a producer must identify the quantity of demand in the market. If there is a high demand for a particular good, the producer will increase the production of the good. If there is a low demand, the producer must decrease the production. therefore., the producer must make accurate decisions about the quantity of the goods to be produced to avoid oversupply or undersupply in the market..

3. How to produce The determination of techniques to be used to produce output. In a market economy, rational producers will use the efficient technique & the cheapest method of production Production techniques are divided into labor intensive and capital intensive techniques. If the cost of labor is less than capital, the producer will select labor intensive. However, if the cost of capital is less than labor, the producer will select capital intensive..

4. For whom to produce Generally, the producer will consider the consumers who are willing to pay for the product produced This means that, people with a higher income will be able to afford more goods while people with a lower income can afford fewer goods. Therefore, to ensure that society as a whole can afford goods that are produced, the government should introduce a fair distribution system..