Economics Notes-Class 12 Online Classes-CENTRAL PROBLEMS OF AN ECONOMY

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Economics Notes-Class 12 Online Classes
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Economics Notes-Class 12 Online Classes

• Welcome back students, today in our note based
  educational series will be discuss on
  some Economics notes based on the pattern of CBSE
  Class 12 Economics. These Economics Notes are
  related to the central problems that an economy
  may face. Use the following information to frame
  your answers and score extraordinary marks in
  your examinations. These Economics notes are
  short, crisp and easy to understand for all.
• CENTRAL PROBLEMS OF AN ECONOMY
• Every economy of the world, whether developed,
  developing or underdeveloped, is facing Economic
  Problems. An economic problem is basically the
  problem of choice in the use of scarce resources
  for satisfaction of unlimited human wants. It has
  to pick within its limited resources, what it
  needs to produce that gives maximum satisfaction
  to its people. The economic problem arises
  because

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Economics Notes-Class 12 Online Classes

• Human wants are unlimited
• Resources are limited
• Resources have alternative uses
• Simply put, choice problem is the central problem
  of an economy. Scarcity of resources having
  alternative uses in relation to demand gives rise
  to the problem of choice-called central problem.
  Every economy has to decide how much resources
  are to be used in production of different goods
  and services. Thus, allocation of resources is
  the fundamental problem. Allocation of resources
  is concerned with
• what to produce
• How to produce
• For whom to produce

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Economics Notes-Class 12 Online Classes

• WHAT TO PRODUCE
• It is the problem of choosing which commodities
  should be produced and in what quantities. An
  economy has to choose from various kinds of goods
  which can be consumed viz. consumer, producer,
  civilian or war goods. It has to make a choice
  not only in the production of kinds of goods but
  also in the quantities in which they are to be
  produced.
•  
• HOW TO PRODUCE
• It deals with what technique has to be used in
  the production of goods and services. A choice
  can be made between labour intensive technique
  and capital intensive technique. An economy must
  opt for that technique which results in the least
  cost of production.

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Economics Notes-Class 12 Online Classes

• FOR WHOM TO PRODUCE
• This is concerned with the distribution of income
  among its various factors of production. This
  problem refers to selection of the category of
  people who will ultimately consume the goods i.e
  whether the economy will produce goods for more
  poor and less rich or for less poor and more
  rich. Since no economy can satisfy all wants of
  its people, problem of choice arises.
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