Central Problem of Economic Societies

Introduction

1. We have heard and read about concepts of Economics such as inflation, recession, taxationa and balance of payments.

2. There is no one definition of Economics. Basically, it deals with how scarce resources are allocated to maximize the unlimited wants that we want to fufil. It is more important to understand the basic concepts rather than to memorize the definition. What is important in Economics is to analyse these concepts thoroughly. For example, we should ask what taxes are why the government taxes people, why the government cannot mint money indiscriminately, what the various types of taxes are and what the government does with revenue from taxes.

3. Economics is important to the:

(a) individual (as a consumer who wants to maximize satisfaction and minimize expenditure);
(b) businessman (as a producer who wants to maximize profits and minimize costs); and
(c) government (to provide a high standard of living for the people).