What are the basic economic questions every society faces?

Every society faces three basic economic questions: What to produce? How to produce? For whom to produce?

The first question, 'What to produce?' is about deciding which goods and services should be produced and in what quantities. This is a crucial question because resources are limited, but human wants are unlimited. Therefore, societies must make choices about what to produce based on their resources and the needs and wants of their population. For example, should a society invest more in healthcare or education? Should it focus on producing consumer goods or capital goods? These decisions often reflect the values and priorities of a society.

The second question, 'How to produce?' concerns the methods and resources used in the production of goods and services. This involves decisions about the use of labour, land, capital and entrepreneurship. For instance, should production be labour-intensive or capital-intensive? Should a society rely more on renewable or non-renewable resources? The answers to these questions depend on a society's available resources, technology, and its economic and environmental goals.

The third question, 'For whom to produce?' is about the distribution of goods and services among the members of a society. This involves decisions about who gets what and how much. For example, should income and wealth be distributed equally or should there be differences based on factors like effort, skill, and risk? Should a society prioritise the needs of the poor or the rich? These decisions are influenced by a society's values, political system, and economic system.

IB Economics Tutor Summary: Every society must tackle three essential economic questions due to limited resources and unlimited wants. These are: What should we produce (choosing goods and services based on needs and resources), How to produce it (deciding on the methods and resources for production), and For whom to produce (distributing goods and services among people). These decisions reflect a society's priorities, resources, and values.