PREPWALK

1. ECONOMICS
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BASIC ECONOMIC PROBLEMS
Short revision series

2. What are basic economic problems?
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 Are also called central/fundamental economic
problems
 The economic problems arise due to two main
reasons.
 Human wants are unlimited
 But means to satisfy wants are limited
 In other words due to scarcity of resources.

3. What are the basic economic
problems?
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 What in what quantity to produce?
 How to produce?
 For whom to produce?

4. What in what quantity to produce?
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 This is a problem of resource allocation
 Decide what goods to produce
 Determine or estimate the demand of products
to be used in production decisions so that
resources are not wasted or over used

5. How to produce?
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 Deciding the means of production
 This is a production problem
 Deciding the method or technique of
production
 Either labour intensive method
 Or capital intensive method

6. For whom to produce?
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 This is a distribution problem
 A product can be targeted at poor people
 Or rich people
 Or entire community

7. Static efficiency
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 Static advantage occurs when an economy is
able to solve all 3 basic economic problems in
an efficient way at once

8. Dynamic efficiency
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 Dynamic advantage occurs when all three basic
problems are optimally solved over a long
period of time.
 If the economy achieves static efficiency over
a period of time then it is dynamically efficient