There are 3 kinds of Central Problems –
1. ALLOCATION OF RESOURCES – Here it is to be decided how to distribute the available resources of a country in the production of different commodities for a desired level of output. This problem is divided into 3 imp. Categories-
- What to produce??
- Here it is to be decided what type of commodities are to be produces & in what quantity.
- There are different types of commodities like consumer goods, producer goods, defence goods etc.
- How to produce??
This problem is related with the selection of technique of production. There are 2 types of techniques of production
- Capital intensive technique of Production(More units of capital & less labour)
- Labour intensive technique of Production(More Labour & less units of Capital)
- For whom to produce??
This problem is related with the distribution of goods among different sections of society & among diff factors of production.
There are two types of distribution
- Personal distribution- It is related with the distribution of goods & services among different sections of society.
- Functional Distribution- It is related with the distribution of output or national income among the different factors of Production.
2. FULLER UTILIZATION – This problem is associated with how to make full use or efficient utilization of the available resources of a country. It is important that resources
- should not remain idle
- There is no wastage of able resources of a country.
So, every country always makes efforts to make best possible use of the renewal resources
3. GROWTH – Growth of resources means how to increase the productive capacity of a country. It is possible in two ways- to make use of Advanced Technology to increase the stock of existing resources of a country.