Question

What are the three central problems of an economy? Why do they arise?

Answer 1

1. Human wants are unlimited and productive resources such as land and other natural resources, raw materials, capital equipments, etc. with which goods and services are produced to satisfy those wants, are scarce.
2. The problem of scarcity of resources is felt not only by individuals but also by the society as a whole. This gives rise to the problem of how to use scarce resources to attain maximum satisfaction. This is generally called ‘the Economic Problem’.
3. Every economic system, be it capitalist, socialist or mixed, has to deal with this central problem of scarcity of resources relative to wants for them.