should be able to combine the best policies of both systems, but in

practice the proportion government controls and response to market

forces varies. Some countries rely more on market emphasis and
others on state planning.

1.) What are the four economic problems?

What to produce - The community has to decide which goods and in what quantities are to be
produced. The society has to choose among numerous consumer goods and decide about
allocation of resources between them. The society has to make a choice between necessities
and luxuries.

How to produce - After the society has decided what to produce the next problem arises as
how to produce. This means which technique of production is to be used. The society is to
decide what combination of resources is too applied for the production of goods.

For whom to produce - For whom to produce means how the national product is to be
distributed among the members of the society. In view of the scarce resources and output,
the society has to decide who should get how much from the total national output.

How much to grow - The scarce resources should not be spent for consumption goods only.
Resources should be allocated for the production of capital goods. If the resources are not
allocated for investment future production will suffer a serious setback.