The economic problem. Image credit

The economic problem. Image credit

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┬áthree 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.