Tag: objectives of economic planning in india

The consumer achieves equilibrium at a point which is in the highest possible indifference curve and which fits the budget of the consumer given the prices of both the commodities. Such a point is only possible when the budget line is tangent to the indifference curve. Therefore, only one indifference curve can touch the budget line. 

The central problem of an economy does not deal with the time of production as it is assumed that human wants are unlimited and goods are required throughout the year. Therefore, the the problem of 'When to produce?' is not regarded as a central problem of the economy.

Causes of Economic Problem:

(i) Unlimited Wants

Human wants are unlimited in numbers. There is no end of human wants; whenever one want is satisfied, automatically the other wants crop up and this goes on and on. There are several wants which are recurring in nature like, food, clothes, shoes, etc. Moreover, human wants are increasing day by day with the development of education, knowledge and civilisation.

(ii) Limited Resources:

In economics, scarcity means that commodities and resources to produce goods and services are less in relation to their demand. Goods and services that satisfy human wants are produced with the help of resources such as land, labour, capital and enterprise. These resources are scarce while wants are unlimited. Due to scarcity of these resources, an economy cannot produce all that goods and services as required by its citizens. Consequently, some wants remain unsatisfied.

(iii) Alternative Uses of Resources:

Means are not only limited but also have alternative uses. Hence, choice has to be made for different alternative uses. For example, electricity can be used for lighting lamps or for cooking food or for operating TV, Fridge, music system etc. Similarly, there are many resources which have got their alternative uses. This characteristic makes resources scarce. Thus, every economy has to choose better alternative uses of resources to which they can be put.

The question for "How to produce?" is faced by the economy. Here they should consider both labour intensive techniques as well as capital intensive techniques depending upon the available resources in the economy.

Economics is the study that establishes an effective relationship between unlimited wants and the availability of scarce resources to overcome the economic problem of limited resources so that all the unlimited wants are satisfied, so as to achieve maximum utility by the use of scarce resources. 

Over-population is one of the biggest problem of Indian which give rise to many other economic problems like poverty as many people are not able to attain a comfortable lifestyle due to scarce resources and unemployment because due to overpopulation and limited jobs people remain unemployed. 

In economics, sustainable development is given the upmost priority as it refers to fulfilment of current economic needs of the people without sacrificing the ability of the future generation to need their needs but if the scarce resources will be consumed in large amount then future generation will not be able to meet their needs and it will result in slower economic growth. Therefore, scarcity can only be cured by limiting needs and wants. 

The central problems of an economy deals in the production of goods as resources are scarce so there is need to answer some questions where it is decide that :

• ·         What to produce? Consumer goods or capital goods?
  
• ·         How to produce? Using labour or capital?
  
• ·         For whom to produce? Rich people or poor people?

The cost of the next best alternative foregone is termed as opportunity cost. Opportunity cost, in terms of production of a commodity refers to the resources which the producer has to sacrifice in terms of the next best alternative which could have been produced using them, in order to produce every unit of the given commodity.