What are the main problems of economy and explain each of them?

The economic problem – sometimes called the basic or central economic problem – asserts that an economy's finite resources are insufficient to satisfy all human wants and needs. It assumes that human wants are unlimited, but the means to satisfy human wants are scarce.

 

Three questions arise from this:

 

What to produce?

'What and how much will you produce?' This question lies with selecting the type of supply and the quantity of the supply, focusing on efficiency.

 

e.g. "What should I produce more; laptops or tablets?"

 

How to produce? Capital goods or consumer goods

'How do you produce this?' This question deals with the assets and procedures used while making the product, also focusing on efficiency.

 

e.g. "Should I hire more workers, or do I invest in more machinery?"

 

For whom to produce?

'To whom and how will you distribute the goods?' and 'For whom will you produce this for?' arises from this question. This question deals with distributing goods that have been produced, focusing on efficiency and equity.

 

e.g. "Do I give more dividends to stock holders, or do I increase worker wages?"

 

Economics revolve around these fundamental economic problems.

The problem of allocation of resources arises due to the scarcity of resources, and refers to the question of which wants should be satisfied and which should be left unsatisfied. In other words, what to produce and how much to produce. More production of a good implies more resources required for the production of that good, and resources are scarce. These two facts together mean that, if a society decides to increase production of some good, it has to withdraw some resources from the production of other goods. In other words, more production of a desired commodity can be made possible only by reducing the quantity of resources used in the production of other goods.

Resources are scarce and it is important to use them as efficiently as possible. Thus, it is essential to know if the production and distribution of national product made by an economy is maximally efficient. The production becomes efficient only if the productive resources are utilized in such a way that any reallocation does not produce more of one good without reducing the output of any other good. In other words, efficient distribution means that redistributing goods cannot make anyone better off without making someone else worse off.

What are the difference between nature and goods productions?

Natural economy refers to a type of economy in which money is not used in the transfer of resources among people. It is a system of allocating resources through direct bartering, entitlement by law, or sharing out according to traditional custom. In the more complex forms of natural economy, some goods may act as a referent for fair bartering, but generally currency plays only a small role in allocating resources. As a corollary, the majority of goods produced in a system of natural economy are not produced for the purpose of exchanging them, but for direct consumption by the producers

Goods production: reasons and conditions of its formation, main features.

Essence of the goods and its features.

The second type of the social economy is goods production. In the goods

production the goods are made to be sold. The economic relations between people

are take place throw market, that’s аhвthis sвstem has the following stages of

goods movement: production-exchange-use.

The conditions of the goods production development:

1. Public division of labour(producersspecialised on making one type of

goods)

2. Private property (the results of the production are owned by holders)

The goods production was the basis of the market development. There are several

types of market economy. They are:

1. Non developed market economy (the half of the production results are

consumed by the producers and the others are sold on the market).

2. Developed market economy (free market economy). Such kind of market

economy has peculiarities as working force is a good, the producer

engage(ɧɚɧɢɦɚɬɶ) hired worker, and the most production results are sold.

3. Regulated market economy (mixed economy). Here is combined the

private sector and government sector. There are several forms of the

government regulations. They are issue a law, conduct a tax and finance

systems of the country. Several forms of regulated market economy used in

the world such as social oriented (Germany), to support a business (the

USA), to protect a big business interests (Japan, Sweden)

4. Deformation market economy (administered-command economy)

What kind of things are called as goods? There are three answers for this

question: 1. Thing should be the result of labour, 2. It should satisfy the

needs, 3. It should be exchanged on the market.

Goods are the results of production and they are produced to be sold on the

market.

Goods have two features, such as exchange value and consumption value.

The exchange value means the interchange of goods to the other goods (later

for money).

The goods value is defined by the labour, which is used in the production

process. There are two types labour, such as real labour and abstract labour.

The real labour helps to create a product, abstract labour calculate how much

money, forces (physical and mental works) are used in the production of the

goods so it is foundation of defining goods value.

The goods value is defined by social necessary working time(ɨɛщɟɫɬɜɟɧɧɨɟ

ɧɟɨɛɯɨɞɢɦɨɟɪɚɛɨчɟɟɜɪɟɦя). The social necessary working time is the

time when the most number of goods are produced by using widespread

equipments and with average rate of intensity of labour.