SS 1 Economics First Term Week 7
Topic- Economic Problems of the Society
- Meaning of the Basic Economic Problems
- How to Produce
- What to Produce
- For whom to Produce
- Efficiency of Resources Used
Meaning of the Basic Economic Problems in the Society
Basic economic problems refer to the everyday problem people encounter while making their choice in trying to satisfy their numerous wants with the limited resources available for them. These major economic problems are what to produce, how to produce, for whom to produce and the efficiency of the resources used.
WHAT TO PRODUCE: The problem of what to produce is one of the major problems facing any society. This is because human wants are unlimited and the resources available are limited.
Factors that Determines What to Produce are
The factors to be considered in determining what to produce are:
- Consumer income: The producer must take into consideration the income of his target consumers in the society.
- Consumers need: The need of the consumers must be considered before consumption must be made, if a producer produces what the consumer will not need, and then it becomes a waste because they will not buy.
- Cost of production: The cost of materials and other factors of production in the producing of the goods and services must also be considered when determining what to produce. In other to make profit, a producer will not produce goods that will cost so much that he will not be able to make profit.
- Type of economy: The type of economy determines the type and quantity of goods to be produced.
- Market demand: The high demand of a particular good will encourages producers to produce more because of the high demand from the producers.
HOW TO PRODUCE: Once what to produce is settle, the next problem on the list is how to produce the goods.
Factors that determine how to produce are:
- Technological advancement: The availability of the technology determines the method and ways by which goods and services will be provided. Developing countries usually adopt the labor intensive mode of production while developed countries adopt capital intensive mode of operation
- Relative cost of factors: The cheaper the relative costs of the factors of production like labor, capital, etc. the more the production of goods and services to satisfy human wants but when cost of factors of production is high only little production will be attained.
- Technique of production: It means the level of involvement of labor and machines in the production. The two techniques of production are (a) labor intensive and (b) capital intensive technique. The labor intensive technique means that there will be more labor than capital in the production process while the capital intensive means that there will be more capital, machines than labor.
- Production function: The production function simply states the quantity of output that a firm can produce as a function of the quantity of inputs to production. There can be a number of different inputs to production, i.e. “factors of production,” but they are generally designated as either capital or labor. (Technically, land is a third category of factors of production, but it’s not generally included in the production function except in the context of a land-intensive business.) The particular functional form of the production function (i.e. the specific definition) depends on the specific technology and production processes that a firm uses.
FOR WHOM TO PRODUCE: It is a known fact that production is not complete until all the goods and services produced gets to the final consumers.
The following factors must be considered when determining who to produce for.
- Type of economic system: In the capitalist and mixed economy a person gets what he wants by the price of the products while in a socialist economy the state introduces a quota system in the distribution of goods and services among the people.
- Level of income: The higher the level of income the higher the more people are able to purchase goods and services produced, if income is low the ability to purchase will be low and this will reduce the rate of production of goods and services.
- Satisfaction of wants: The goods and services must have the ability to satisfy human want and need.
EFFICIENCY OF RESOURCES USE: Efficiency of resources use in production of refers to the optimum use or combination of factors of production to achieve higher and better output at a reasonable cost.
Factors that Determines the Efficient Use of Resources
- Techniques of production: The use of capital intensive which includes the use of machines and equipment in the process of production produces more goods, safes time, reduce wastage and be more efficient than the use of labor intensive method.
- Quality of labor: The category of labor employed for production will help to determine efficiency, for instance a skilled labor could contribute more and bring about efficient and manage the allocation of resources and quantity of goods.
Test and Exercise
- All the following factors determine what to produce except (a) market demand (b) consumer income (c) cost of production (d) technique of production.
- The technique of production that has to do with the use of more capital, machine and machinery is (a) labor intensive (b) knowledge intensive (c) capital intensive (d) machine intensive.
- The problems that people encounter while attempting to satisfy their numerous wants with the limited resources available to them is (a) basic economic problem (b) high development problem (c) educational problem (d) basic social problem.
- Who are the main beneficiary of production (a) the producers (b) the consumers (c) the wholesalers (d) the retailers.
- The optimum use or combination of factors of production of production to achieve higher and better output at a reasonable cost is (a) what to produce (b) for whom to produce (c) how to produce (d) efficiency of resources use. https://passnownow.com/classwork-support/