BASIC ECONOMIC PROBLEMS IN THE SOCIETY.

Hey Guyz, Happy Monday. It’s actually the first Monday in the month of May and it’s such an honour to be ALIVE don’t you think? Well today we continue Econs. 101.

Basic Economics Problems refer to the problems people encounter in the society, while trying to satisfy their numerous human wants, and with the limited resources available. They include- What to Produce, How to produce, for whom to produce and Efficiency of Resource use.

WHAT TO PRODUCE.

The question of what to produce is one of the basic economic problems that confronts any society. This arises mainly as a result of the fact that human wants are unlimited relative to the available resources. It is impossible for all of human wants to be satisfied, thus the need to allocate resources in order of priority is crucial.

FACTORS DETERMINING WHAT TO PRODUCE:

1. Market Demand- The demand of a particular set of goods and services by customers may encourage producers to produce more of these goods and services. No
producer will ever produce what is not demanded by the market.

2. Type of Economy- This goes a long way in determining the type of goods and services produced in a country. For Example, In a Capitalist Economy, the Price System determines the type and quantity of goods and services produced bearing in mind that, profit is the major determinant of what to produce, whereas in a Socialist Economy the state controls and directs the allocation of resources.

3. Availability of Resources- When resources for production are available and affordable. Producers will be encouraged to produce, but when resources are not available there will be no production. Since resources are limited producers may not always have enough to produce commodities to satisfy human wants.

4. Consumers’ Income- Producers take into consideration the earnings of its customers when deciding what to produce.

HOW TO PRODUCE.

This is another basic economic problem that arises as soon as what to produce is figured out.

FACTORS DETERMINING HOW TO PRODUCE:

1. Technological Advancement- The method of production adopted depends on the level of technological development of the state. Developing countries usually adopt Labour Intensive mode of production, while Developed countries adopt Capital Intensive mode of Production.

2. Production Function- This is any analysis that shows the possible quantity of goods, by using each of the given alternative combination of resources that produces the largest quantity of output at the lowest cost of production. For example, Method A of producing Chocolate costs N 200,000 for 500 cartons, Method B costs N 150,000 for 250 cartons and Method C costs N 130,000 for 600 cartons, a company producing Chocolate will choose Method C because it costs cheaper to produce chocolate and brings forth more products.

3. Relative Cost of Factors of Production- The cheaper the cost of the Factors of production- Land, Labour etc, the more the production of goods and services to satisfy human wants and vice versa.

FOR WHOM TO PRODUCE.

Goods and Services must get to the final consumers, therefore Production is not complete until the goods and services get to the final consumers.

FACTORS DETERMINING WHOM TO PRODUCE FOR:

1. Satisfaction of Wants- All goods and services are produced to satisfy human wants in the society.

2. Level of Income- The higher the level of income of the consumers the more they will be willing to buy goods and services. But if the level of income is low, the purchasing power will be low as well and thus will lower the rate of production.

EFFICIENCY OF RESOURCE USE.

Efficiency of Resource use in production refers to the average use or combination of the factors of production to achieve higher and better output at a reasonable cost. It is thus a wise decision to ensure that the limited available resources are efficiently used to produce desired goods and services.

FACTORS DETERMINING EFFICIENT USE OF RESOURCES:

1. Quality of Labour- Skilled Labour unlike unskilled labour used in production, could contribute to efficient use and effective use as well as allocation of production, reduction of wastage, savings in time and consequently an increase in the quality and quantity of output.

2. Techniques of Production- The use of capital intensive mode of production which is the use of machines and equipment, may produce more goods and service, save time, reduce wastage and be more efficient than the use of labour intensive mode of production, which may waste time, produce less and increase wastage.

This concludes our session for today, hope you had fun and learnt something new today. Until we meet again, remain ever blessed and remember you are for SIGNS & WONDERS. God Bless You.