Meaning and Problems

Meaning of an Economics:An economy system refers to the conditions under which goods and services are produced and distributed in a country.It is constituted of all the individuals, households, forms, firms, factories, banks and government who act and interact to produce and consume goods and services.Thus an economy is a social organism through which people make their living.

How an economic works? 

Working of a  modern economy is extremely complex and complicated. Here millions of people participate and contribute to its working in different ways and in different capacities. In a modern economy, economic activities of different people are interrelated and interdependent. The economic players in a simplified model of a modern economy.

Problems of an economy: 

What to produce?(Problem of choice)

The first central problem of an economy is to decide what to produce and how much to produce. The problem what to produce is the problem of choice between commodities and this problem arise due to scarcity of resources. 

How to produce?(Problem of choice of technique)

The next problem of an economy is to decide as to how to produce goods and services. This problem how to produce is the problem of choice of technique.

For whom to produce?(Problem of distribution)

The third basic problem of an economy is to decide for whom the goods shall be produced. This is a problem of distribution of goods and services among the members of the society.