The Economic Problem

The Economic Problem

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 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.

By | 2017-01-17T11:16:22+00:00 December 7th, 2015|Notes, O Level Business Studies Notes, Ordinary Level Notes|0 Comments

About the Author:

He holds an Honours in Accountancy degree from the University of Zimbabwe. He is passionate about technology and its practical application in today's world.

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