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Understanding the Three Economic Questions

Discover how the three economic questions shape a country's economic system. Learn what goods and services to produce, how much to produce, methods of production, and distribution among consumers. Uncover the impact of resource allocation on economic prosperity.

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Understanding the Three Economic Questions

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  1. THE THREE ECONOMIC QUESTIONS These questions determine what kind of economic system a country will have.

  2. 1a. What to Produce?An economy can produce goods & services **Goods: are objects, such as food, clothing, and furniture, that can be bought. ** Services– work performed by one person for another.

  3. 1b. How much to produce? • How much of our resources are we willing to use? • How much of the product will the consumers be willing to buy? • Example: Production of pencils increases towards the beginning of the school year

  4. 2. How to produce (methods) • This includes the use of capital goods & labor: • Capital: Example – assembly line machines, ax, chainsaw, technology • Labor: Example – lumberjack, miner, machine operator, etc.

  5. 3. For whom? • Who receives the output (goods and services)? • How are we going to share/distribute what we produce?

  6. How each nation answers these questions determines what economic system they have.

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