ZIMSEC O Level Business Studies: The Economic Problem.
The Economic Problem
- Arises because resources (factors of production) are limited and scarce
- whilst human needs and wants are unlimited.
- This leads to the three questions:
- What to produce?
- For whom to produce?
- How much to produce?
- The economic problem is also known as the basic economic problem, the central economic problem or the fundamental economic problem.
Allocation of resources
- Since needs and wants are unlimited whilst resources are limited
- This means that all goods that society requires cannot be produced
- so in an economy the responsible authority has to decide on what to produce, for whom to produce and how to produce.
- These are known as the three economic questions.
- There are three general approaches to solving these questions:
- Using a Free Market Economy
- Using a Command/Planned Economy
- Using a Mixed Economy
To access more topics go to the Business Studies Notes page.