What Are the Four Basic Economic Questions?
The four basic economic questions are: what goods to produce, how to use resources in the production process, who receives the finished goods and when to produce the goods. Answering these four questions is essential for an economy to function properly.
The question of what to produce is one that addresses both the needs of society and the most efficient use of available resources. The question of how to use those resources is equally important and focuses on how to best produce what’s desired. This question tends to deal with the manufacturing processes, especially the amount of labor required, the level of technology applied and the level of capital needed to produce products at the lowest cost using the fewest resources. The answer also delves into questions of tax rates and which markets require subsidization to thrive.
The question of who receives the goods deals with distribution. When to produce goods is also a question of efficiency; it deals primarily with the best times to produce goods and services so as to incur the lowest production costs and realize the highest possible sales.