Three Questions Every Economic System Must Answer
In order to run an economic system, every country must decide the following three questions:
- What to produce: Besides producing goods that are basic necessities of human life, a nation must work to produce other goods and services that will lead to development and prosperity. Choices have to be made about production of which goods should be prioritized before others.
- How to produce: There is also a decision needs to be made how to go about producing the goods and allocate resources. For example, should production be based solely on fast paced technology or does it needs human touch somewhere in the middle of the production lines?
- For whom to produce: There has to be a consumer in mind when producing goods and services. This way the production won’t go waste and will be focused on meeting the demands of the consumers. If there are lack of demand for certain products, then production of this product may need to be changed.