Three Basic Economic Questions By: Rosio Ojeda

What to produce?

  • Remember that resources (land, labor, capital, entrepreneurship) are scarce or limited. We cannot have everything; we must make choices.

How to produce?

  • If labor is cheap and capital is expensive, a labor-intensive technique would be considered and vice-versa. The prices of labor and capital are determined by the demand for and supply of labor and capital respectively.

For whom to produce?

  • Goods are produced for those people who have the paying capacity. The capacity of people to pay for goods depends upon their level of income.

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