Question

Three of the fundamental economic questions or choices that a society has to deal with are: What to produce? How to produce? and For Whom to produce? Discuss how these three basic questions are answered or decided in a market system.

Answer 1

The presence of scarcity generates the fundamental economic dilemma that any community, rich or poor, faces: how to make the best use of scarce productive capital to fulfill human needs and desires.
To solve this fundamental problem, each society needs to answer these three fundamental questions:

1. Which products are to be produced and what services?
An economy, for example, needs to decide whether to manufacture kitchen appliances or weapons, create and repair roads or buy school textbooks.

2. Why does it generate products and services?
Will we be using copper or plastic for making pipes, for example? Should robots be used to produce shoes, or would workers make them by hand? Can an electricity plant be installed near the ocean or inland? What fertilizer is best used to grow strawberries? There are millions of decisions needed to find out how products and services can be generated.
3. How should have the goods and services consumed?
Who will get to consume them once the products and services are produced? Would people be eating them first-come, first-servedly? Can the products be allocated by height, weight, religion, age, gender sex, appearance, power, health or wealth?

Societies or cultures respond differently to the economic questions.
Societies are looking at economic targets and make decisions based on what is valued most.
Many economic objectives that are considered are: Economic Performance Making the most of wasteless capital is an economic priority.
Economic freedom An economic objective is being able to make decisions about which goods and services to manufacture and sell without interference or intervention by the government.
This independence encourages businesspeople to take chances and make decisions to start new companies.

Economic protection Where products and services are accessible where appropriate. Having a safety net which protects citizens in times of economic disaster.
Economic equity Capital equally distributed.
Economic development and creativity The use of innovative ideas and ways to produce products and services results in prosperity and a higher standard of living or lifestyle for all.

An economic system is the tool a society uses for generating and distributing goods and services.
There are several basic types of economic systems for answering the three questions of what, how and for whom to produce: conventional, order, business and mixed.
Traditional Economies: Economic decisions are based on practice and historical precedents within a conventional economy. For example, in tribal cultures or cultures characterized by a caste system, people often perform the same type of work as their parents and grandparents, regardless of skill or capacity, particularly social strata or holding certain positions.