Answer to Question #192083 in Economics for michael

Question

critically discuss the fundamental problem of economics in relations to individuals, households and government.

Answer 1

Any society, regardless of the economic system existing in it, solves three main fundamental problems of the economy:

1. What goods and in what quantity should be produced? The solution to this problem comes from determining the needs of people and society in goods and services and meeting them in various ways: to produce them yourself, exchange them for other goods, receive them as a gift. With this in mind, society must decide what it would like to have or receive from an individual immediately, what it could wait to receive, and what it could refuse altogether. The choice can be quite difficult since it depends on the level of development of the country, the level of income of the population, and its needs. For this, it may be necessary to increase production volumes, change the structure of the national economy, modernize production, etc.

2. How should the goods be produced, from what resources, and with the help of what technologies? There are various options for the production of goods and services. The challenge is from what resources and with what technology these goods should be produced? By what organization of production? For example, there are various options for building a particular house, school, hospital, etc. Some buildings are built by private individuals using manual labor, while others - by the state using mechanized labor.

3. For whom should the product be produced? The solution to this problem assumes that the quantity of goods and services produced is limited, and the problem of their distribution arises. In order to satisfy all needs, it is necessary to understand the mechanism of distribution of goods. Who should use these products and services? Should all members of society receive the same share or not? Solutions to these problems determine the goals and objectives of the society.