Economy and its Central Problems

Economy and its Central Problems

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1.What is an Economic Problem?
Ans. The problem of choice which arises due to scarcity of resources as human being have unlimited wants.

2. What is Economising of Resources?

Ans. Meeting unlimited wants with limited resources or utilising the resources in an efficient manner is known as economising of resources.

3. Explain the central problems in an economy?

Ans. There are three central problems in an economy are as follows:-

1. What to produce:- In this we decide that what should be produced and in what quantity.

Solution:- This problem can be solved by analysing the demand and supply in an economy.

2. How to produce:- In this we decide that which type of technique is to be used to produce in an economy.

There are two types of technique are as follows:-

Capital Intensive Technique:- In this technique we use more units of capital and less units of labour. for eg:- In developed country like USA.

Labour Intensive Technique:- In this technique we use more units of labour and less units of capital.

For eg:- In developing country like INDIA.

Solution:- This problem can be solved by analysing the availability of resources in an economy.

3. For whom to Produce:- In this we decide that for whom we should produce the goods and the distribution of national income in an economy.

Solution:- The problem can be solved by analysing the distribution and composition of national income in an economy.

4. Difference between MicroEconomics and MacroEconomics?
Ans. 

S.NO.	MICROECONOMICS	MACROECONOMICS
1.	The study of economics on the basis of taking up an individual like a firm is known as microeconomics.	The study of economics on the basis of taking up economy as a whole.
2.	It is a theory of Price.	It is a theory of Income and Employment.
3.	It is a narrow concept.	It is wider or broad concept.
4.	It is a partial equilibrium analysis.	It is a general equilibrium analysis.
5.	It is bottom-up view approach.	It is a top-down view approach.
6.	For e.g.: individual demand, individual supply etc.	For e.g. aggregate demand, aggregate supply etc.