The central problems of an economy are:
(i) What to produce?
this problem has two dimensions:
(1) what good and services are to be produced
2) in what quantity goods and services are to be produced
(ii) How to produce?
it refers to the technique of production:
labour intensive technique and capital intensive technique.
(iii) For whom to produce
this problem relates to the distribution of output in the economy.
It has two aspects:
Factoral distribution of income and inter-personal distribution of income.
The central problems of an economy arises due to three reasons:
a) The wants of the people are unlimited.
b) The resources to satisfy these wants are limited.
c) These limited resources have alternative uses.
