Engineer
Rony John 09/07/2014
Three Problems of Economy
Ever since the idea of sustainable trade between human beings came into existence, society has always faced the three fundamental problems of economics. Fast forward to the present day, where organisational management is key, the three problems are just as crucial as it ever were.
The fundamental problems faced by an economic organisation are-
1.What to produce?
2.How to produce? and
3.For whom to produce. Addressing these questions successfully will lead to a successful and profitable organisation.
What to produce?
Any organisation intending to sustain itself has to answer this question before proceeding ahead with its business. To understand the depth of the question it is necessary to consider that society will only accept a product based on their wants and needs. If society does not require or are not interested in a particular product, the business will inevitably fail. Scarcity of resources can be a major factor in answering this question. However, the choice of the consumer remains the most important factor. Manufacturers will have to compete with each other to give consumers what they want at competitive prices.
Adjustments can be made by companies and organisation to the cost of production and quality of the product to make it more appealing to consumers. For instance, a choice can be made between production of designer shoes that are expensive or a cheaper alternative without any brand name. Here, the demand and response of the consumers towards the product will be key in the decision making process.
In some cases, government policies can also drive the need of products and services. An example
Three Problems of Economy
Ever since the idea of sustainable trade between human beings came into existence, society has always faced the three fundamental problems of economics. Fast forward to the present day, where organisational management is key, the three problems are just as crucial as it ever were.
The fundamental problems faced by an economic organisation are-
1.What to produce?
2.How to produce? and
3.For whom to produce. Addressing these questions successfully will lead to a successful and profitable organisation.
What to produce?
Any organisation intending to sustain itself has to answer this question before proceeding ahead with its business. To understand the depth of the question it is necessary to consider that society will only accept a product based on their wants and needs. If society does not require or are not interested in a particular product, the business will inevitably fail. Scarcity of resources can be a major factor in answering this question. However, the choice of the consumer remains the most important factor. Manufacturers will have to compete with each other to give consumers what they want at competitive prices.
Adjustments can be made by companies and organisation to the cost of production and quality of the product to make it more appealing to consumers. For instance, a choice can be made between production of designer shoes that are expensive or a cheaper alternative without any brand name. Here, the demand and response of the consumers towards the product will be key in the decision making process.
In some cases, government policies can also drive the need of products and services. An example