Following are the 3 fundamental economic problems faced by all societies worldwide.
What to produce?
Each and every economy must determine what products and services, and what volume of each, to produce. In some way, these kinds of decisions should be coordinated in every society. In a few, the govt decides. In others, consumers and producers decisions act together to find out what the society’s scarce resources will be utilized for. In a market economy, this ‘what to produce?’ choice is made mainly by buyers, acting in their own interests to fulfill their needs. Their demands are fulfilled by organizations looking for profits. For instance, if cell phones are in demand it will pay businesses to produce and sell these. If no one desires to buy radio sets, it is not worth producing them. In case a manufacturer produces an item which buyers don’t buy in much quantity, there will likely be inadequate income. The manufacturer will have to enhance the quality and modify the product to match buyer tastes. If the item is still not preferred, the producer will most likely halt the production. In this manner, buyers get the goods they need. Customers rule the ‘what?’ decision. They ‘vote’ for certain products and services by spending money on those they like. Each and every manufacturer has to offer what buyers want so that they can compete effectively against other manufacturers. Government authorities also perform some part in making ‘what?’ decisions. For example, a law demanding all ladies to wear a helmet generates demand for helmets, and profit-seeking businesses will produce them.
