Explain any three central problem of an economy ​

ANSWER:

1. What to produce?

2. How to produce?

3. For whom to produce?

Explanation:

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Some of the central problems that are faced by every economy of a country are as follows:

Production, distribution and disposition of goods and services are the basic economic activities of LIFE. In the course of these activities, every society has to face scarcity of resources. Because of this scarcity, every society has to decide how to allocate the scarce resources.

It leads to following Central Problems that are faced by every economy:

1. What to produce?

2. How to produce?

3. For whom to produce?

These problems are called central problems because these are the most basic problems of an economy and all other problems revolve around them.

These 3 problems are studied under the problem of ‘ALLOCATION of Resources’.

Allocation of Resources (Studied under Microeconomics):

Allocation of resources refers to the problem of ASSIGNING the scarce resources in such a manner so that maximum wants of the society are fulfilled. As resources are limited in relation to the unlimited wants, it is important to economize their use and utilize them in the most efficient manner.