ICSE Class 9 Answered

Central problems of an economy are the problems faced by and common to all kinds of economic systems (capitalism, socialism and mixed economy). These include problems with decision making about what to produce, how to produce and for whom to produce. This is because it is not possible for any economy to produce an unlimited variety of goods with limited resources.

The three main problems faced by every economy are:

1. What to Produce?

All demands  of  every individual in the economy cannot be satisfied, so society has to decide the commodities which are to be produced and the quantities in which they are to be produced           

2. How to Produce?

This is related to the allocation of resources to production techniques which have to be used during the production of goods and services. Production can be done either through labour-intensive techniques or capital-intensive techniques

3. For whom to Produce?

This relates to the distribution of national products among various individuals. Every economy faces the problem of allocating its national resources to the  production  of  different  goods  and  services  and  of  equally distributing  the  produced  goods  and  services among individuals within the economy.