MAJOR ECONOMIC PROBLEMS
What is an Economic Problem ?
In view of the scarcity of means at our disposal and the multiplicity of ends we seek to achieve, the economic problem lies in making the best possible use of our resources so as to get maximum satisfaction in the case of a consumer and maximum output or profit for a producer. Hence economic problem consists in making decisions regarding the ends to be pursued and the goods to be produced and the means to be used for the achievement of certain ends.
Fundamental Problems Facing an Economy
From the definition of economic problem given above we can derive the following fundamental problems which as economy has to tackle.
(1) Whallo Produce. The first major decision relates to the quantity and the range of goods to be choose between different alternative collection of goods and services that may be produced. It also implies the allocation of resources between the different types of goods, e.g., consumer goods and capital goods.
(2) How to Produce. Having decided the quantity and the type of goods to be produced, we must next determine the techniques of production to the used. e.g., labour-intensive or capital-intensive.
(3) For Whom to Produce. This means how the national product is to be distributed, i.e., who should get how much. This is the problem of the sharing of the national product.
(4) Arc the Resources Economically Used? This is the problem of economic efficiency or welfare maximisatiorr,There is to be no waste or misuse of resources ince they are limited.
(5) Problem or Full employment. Fullest possible use must be made of the available resources. In other words, an economy must endeavour to achieve full employment not only of labour but of all its resources.
(6) Problem of Growth. Another problem for an economy is to make sure that it keeps 011 expanding or developing so that it maintains conditions of stability. It is not to be static. Its productive capacity must continue to increase. If it is an under-developed economy, it must accelerate its process of growth.