Q12 of 50 Page 1

Why do the central problems of an economy arise? Explain the central problem of “for whom to produce”?

The central problems of an economy arises due to three reasons:

a) The wants of the people are unlimited.


b) The resources to satisfy these wants are limited.


c) These limited resources have alternative uses.


The central problem of ‘for whom to produce’ means how much output should be distributed among the people. It also means the level of output a person will receive depending upon his income. So, the basic issue here lies in deciding how should the income be distributed in society.


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