Basic economic problems of society arise from the fact that resources are scarce and unlimited wants exist. These problems can be divided into four main categories: what to produce, how to produce, for whom to produce, and how to distribute the goods and services produced.
The problem of what to produce refers to the decision about which goods and services should be produced in a society. This decision is influenced by the preferences of consumers and the availability of resources. For example, if a society has a lot of fertile land, it may choose to produce more agricultural goods, while if it has a lot of skilled labor, it may choose to produce more manufactured goods.
The problem of how to produce refers to the decision about the most efficient way to produce the goods and services that have been chosen. This decision is influenced by technology, the availability of resources, and the cost of production. For example, a society may choose to produce goods using labor-intensive methods if it has a lot of available labor but limited capital, or it may choose to use capital-intensive methods if it has more capital available.
The problem of for whom to produce refers to the distribution of the goods and services produced in a society. This decision is influenced by the income and wealth distribution in the society and the distribution of purchasing power. For example, if a society has a high level of income inequality, the goods and services produced may be more heavily weighted towards those with higher incomes, while if there is more equality in the distribution of income, the goods and services produced may be more evenly distributed.
Finally, the problem of how to distribute the goods and services produced refers to the decision about how to distribute the benefits of production among the members of a society. This decision is influenced by the distribution of income and wealth, as well as the social and political values of the society. For example, a society that values equality may choose to distribute the benefits of production more evenly, while a society that values individual achievement may choose to allow the distribution of benefits to be more unequal.
In summary, basic economic problems of society arise from the fact that resources are scarce and unlimited wants exist. These problems include what to produce, how to produce, for whom to produce, and how to distribute the goods and services produced. The solutions to these problems depend on the resources available, the preferences of consumers, and the values and priorities of the society.