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What are the central problems of an economy? How does planning help in solving them? 


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    There are three types of central problems that every country face:

    • What to produce?

    • How to produce?

    • For whom to produce?

    These problems are called the central problems because these are the most basic problems of an economy of an individual country and all the other problems or most of the problems of an economy revolves around these three problems.

    1. What to produce: this problem includes the decisions and some issues such as selection of the goods and services that are to be produced and the quantity that is to be produced of each selected product and services or we can say commodity. As we know that every economy as limited and different resources due to which the economy cannot produce all the goods and services. For example, if we want to produce more sugar in comparison with other sweet products, then its only possible when we reduce the production of other goods.

    2. How to produce: this problem mainly occurs after the selection of goods and services that are tend to be produced. This problem generally refers to the selection of the techniques through which a company can produce goods and services and the machinery that is to be used in an industry for producing goods and services. A good or service can be produced by many different techniques but the company has to choose wisely that which technique would work more effectively and efficiently.

    3. For whom to produce: this problem occurs while the production of goods and services and this problem refers to the selection of the category of people who will consume the goods and services. A company has to choose very wisely between poor and rich as if a company can produce its goods either for more poor than the rich or it can produce its goods for more rich and less poor and as every economy now have very scarcity of resources so no society or economy is able to fulfil all the wants of their people.

    Planning helps a lot in solving these central problems of an economy as by planning, an economy can decide what to produce at what time and how to produce with correct option and for whom to produce looking towards all the wants of people. Planning makes easier to take decision for these three central problems, it helps in selection of goods and services that are to be produced and help to choose the techniques through which production should be done wisely and helps to find the people and select the people that for whom what a company have to produce.

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