Theory question 103
Basic ConceptsSection B (answer three questions only from this section)
'Economic problems arise because a country's resources are limited in relation to her unlimited wants'. Identify and explain these economic problems.
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Basic economic problems of every society:
1. What to produce (and in what quantities): limited resources mean the society must choose which goods to make.
2. How to produce: choice of technique – labour-intensive or capital-intensive – and how to combine factors efficiently.
3. For whom to produce: how output is distributed among the people.
4. Efficient use of resources: avoiding waste and unemployment of resources.
5. Economic growth: how to raise productive capacity over time.
Related ideas: scarcity forces choice, choice needs a scale of preference, and every choice has an opportunity cost.
Explain each problem, not just name it.