THE BASIC

ECONOMIC

PROBLEMS
1. What and how much to produce?

2. How to produce?

3. For whom to produce?

1. What and how much to produce?

Decision as to what goods and

to produce should be made by
societies.

Then, the amount or quantity of

goods to be produced should be
considered.
2. How to produce?

This has something to do with

the production method to be used.

This would refer to the

combination or mix of resources and
technology to be applied or used in
production.
 Production technique or method is
considered as Labor intensive if the way that a
good or service is produced depends more
heavily on labor.

Labor intensive technique or method

of production is used usually for individual or
personalized products or is used in small scale
production.
 Production technique or method is said
to be Capital-intensive if the production
process requires a high percentage of
investment in fixed assets or capital (machines,
factory, and the like).

A capital-intensive production process

will have a relatively low ratio of labor inputs.
3. For whom to produce?

This is about the market or the

target market for the goods and services
produced.

This could be for the young or the

old, the male or the female, and others.
 (Economic system)
An economic system is a means by which
societies or governments organize and
distribute available resources, services, and
goods across a geographic region or country.
Economic systems regulate the factors of
production, including land, capital, labor, and
physical resources.
Https://corporatefinanceinstitute.Com/resources/knowledge/economics/
economic-system/
Economic systems
are used or
adopted by
organizations,
societies,
and economies to
determine the
answers to the
basic economic
problems.
Economic systems:

1. Traditional economic system

2. Command economic system
3. Market economic system
4. Mixed economic system
 1. Traditional economic system

> Decisions on what,

how much, how , and for whom
to produce are determined by
practices in the past.
2. Command economic system

> Is an economic system which is

controlled by a centralized power.

> Most decisions are made by the

central government in this economic system.
In command economy or
centrally planned
economy, choices about
resource use, production
and consumption are
made by the leaders
of the government .
 3. Market economic system

> Is also known as free-

market economy, where firms and
households act in self-interest to
determine how the economic resources
are to be allocated, what goods and
services are to be produced, who buys
the goods and services produced.
 In market economies,
choices about production
and consumption are
made primarily by
individuals interacting in
markets.
4.Mixed economic system

> Is a combination of two or more

economic systems.

. > It protects private property and

allows a level of economic freedom in
the use of resources but allows for
governments to interfere
in economic activities in order to
achieve social aims.