MAJOR ECONOMIC PROBLEMS

The various schools of thought on Economics and its subject matter focus mainly on the following:

•          The means at our disposal are scarce
•         There is a multiplicity of wants that we seek to achieve
•          The consumer needs to get maximum satisfaction
•          The producer wants to maximize output or profit

Thus in the words of Henry Smith, A Prospect of Political Economy (1968)

“In view of the scarcity of means at our disposal and the multiplicity of ends we seek to achieve, the economic problem lies in making the best possible use of our resources so as to get maximum satisfaction in the case of a consumer and maximum output or profit for a producer. Hence the economic problem consists in making decisions regarding the ends to be pursued and the goods to be produced and the means to be used for the achievement of certain ends.”

FUNDAMENTAL PROBLEMS FACING AN ECONOMY

Let us examine each of these problems in detail: