Other Problems Of An Economy


In addition to the central problems, every economy faces two other problems. These are –

  • (a) The problem of optimum utilization of resources
  • (b) The problem of growth of resources

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Optimum Utilization of Resources

Resources are scarce they must not be wasted. They must be used judiciously to give the maximum output. Thus, optimum utilization of resources has the following implications –

(i) All resources must be utilized

If resources are not utilized/employed or are lying idle, it means that they are being wasted. Wastage of resources results in low output. For example –

  • People may be unemployed, this means that human resources are being wasted.
  • Similarly, when workers in a factory go on strike, capital resources lie idle and are wasted.

If these resources are utilized, the output that can be produced in the economy shall rise. Thus, every economy must ensure that scarce resources are utilized and not left idle or unemployed.

(ii) Efficient Utilization of resources

Since resources are scarce, they should not be under utilized. Under utilization of resources means that resources are not being used to their fullest capacity. For example –

  • If a person finds a job in which he works only for 4 hours a day, but his capacity to work is 8 hours a day, then his labour is under utilized. In other words, the person is not being employed efficiently. If he had a job for 8 hours a day, the output would increase.

Under utilization of resources also results in wastage of resources. Hence, every economy must try to adopt techniques of production that ensure efficient utilization of resources.

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Growth of resources

Wants are unlimited. This means that people continuously want more and more goods. However, these ever-increasing wants can not be satisfied unless the resources that produce goods and services are increased. Thus, resources must grow to satisfy the constantly increasing wants in an economy. So, how can resources grow in an economy? Resources can increase if –

(i) There are quantitative changes in the resources

Quantitative increase in resources occurs when the actual quantity of resources that is available in the economy increases. For example –

  • When the population increases, then the quantity of human resource increases.
  • Similarly, when more natural resources are found, it increases the availability of resources in an economy.

(ii) There are qualitative changes in resources

Qualitative changes in human capital occur due to better training and skill development. Qualitative changes in man-made capital occur when there is an improvement in technology. Under qualitative changes, the amount of resources available does not change but their productivity increases. Productivity is defined as the output per unit of input. For example –

  • If labour gets trained, then the output from the same person can increase. Productivity improves due to better skill and training.

Thus, growth of resources occurs when the physical availability of resources increases and/or there is technological upgradation or an improvement in the quality of resources.

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Bibliography : NIOS – Economics

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