In this article we will study Economics, Economy and Central Problems of Economy. We will discuss about our economy, its meaning and some basic concept of economy and also study that how economy problems are arises and how to overcome with these problems.
Now we will discuss what economy means ?
Economics, Economy and Central Problems of Economy
In general we say that , Economics is a branch where analysis of production , distribution and consumption of goods and services.
LIONEL ROBBINS :- Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.
ALFRED MARSHALL :- Economics is a study of man in the ordinary business of life. It enquires how he gets his income and how he uses it. Thus, it is on the one side, the study of wealth and on the other and more important side, a part of the study of man.
Economics is a science as well as social science in which we studies the way to : (1). Use limited resources and it have alternative uses. (2). Produce goods and services. (3). Distribution of goods among different people.
Marginal Opportunity Cost :
Marginal opportunity cost refers to that when a commodity sacrifices to gain additional unit of another commodity. For example : Priyanka Ltd. produce two commodities X and Y , after some time demand of X commodity increases and decided to increases production of X commodity, so decreases Y production to gain addition units of X commodity, that is called MOC.
Marginal Opportunity Cost = ΔY ΔX
= Loss of output of Y Gain of output of X
It is a situation when requirement of goods exceeds their availability so that goods acquire market price / value.
Resources are not only scares but also have alternative uses i.e., land can be used for production of rice, wheat or for constructions of warehouses for factories. So, its leads to problem of choice whether they produce rice or constructing warehouse because resources are scare but having alternative uses.
Central Problems of an Economy :
- What to Produce – The first problem of an economy is related to goods which are to be produced. In economy all goods are not produced because it has limited resources and it can not full all demands. Therefore, an ecomony has to choose that which type of goods to be produced. Then problem arises on its quantity, the quantity of the goods depends on its uses if the commodity X has more uses rather then commodity Y, so they produce commodity X.
- For Whom to Produce – The main objective of production of goods is to fulfill public needs in this problem their is also a problem of choice that the goods are produced for rich or for poor people. There are two aspects of distribution : (1). Personal distribution – It means how national income of an economy is distributed among different group of people. (2).Functional distribution – It means distribution of national product among different factors of production i.e, land , labour , capital, etc.
- How to Produce – This problem is related to the choice of technology, it means which technology is used on production. There are two types of techniques of production are : (1).Labour intensive technique – It refers to that technique in which labour is used more than capital. (2).Capital intensive technique – It refers to that technique of production in which capital is used more than labour. An economy must decide that which technique is to be used for obtain efficient production.
Why does an Economic Problems arises ?
In economy several problems are arises due to :
- Unlimited wants – In economy human having multiplications of wants and there is no end of human wants since as one is satisfied. At a time economy does not fulfill his all demands because resource is limited but human wants are unlimited.
- Limited Resource – Resources which are used for the production of goods and services are limited as against wants which are unlimited. Scarcity of resources create choice problem.So, the production of all goods and services are not necessary because of limited resource.
- Alternative Uses – Resources are not only limited but can be put into alternative uses. The same resource is not used for more purpose. For eg : Land is not used for farming as well as for making playground at same time. It use for that purpose which is more important because resources are scare, when it used for one purpose it may not used for another purpose. An economy faced with the problem of choice between alternative commodities that can be produced with these resources.
so we have studied Economics, Economy and Central Problems of Economy. we discussed our economy, its meaning and some basic concept of economy.
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