ECO-The role of markets in allocating resources, page no 40-41
All economies face the basis economic problem of scarcity of resources. There are three key economic questions about determining resource allocation:
What production should take place: This question is about deciding which goods and services should be provided in the economy. Ex: more roads and airports or to have more schools and hospitals. But if a country has a limited amount of resources. They will have to deicide what to make.
How should production take place: This question is about the methods and processes used to produce the desired goods and services. Ex: decision makers will have to decide which combination of the factors of production should be used in the production process.
For whom should production take place: This question is about which economic agents receive goods and services. Ex: should any goods and services be provided free to everyone in the economy even if their willingness and ability to pay for them or should goods and services only be produced for those who can pay.
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