In the world of economics, many theories are used and of course each has its own problems. So, you must know about classical economics and modern economics in order to adapt to current conditions.
Before proceeding to the discussion of the problems, let us first get acquainted with the understanding of classical and modern economics so that we can understand them more fully.
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Understanding Classical Economics
Classical economics was first popularized by Adam Smith, who said that a free market would form its own equilibrium. This means that the market balance does not need any intervention from certain parties.
In this way, supply creates its own demand so that aggregate production will generate sufficient income to cover all the resulting expenditures.
Characteristics of Classical Economics
The following are some of the characteristics of classical economics, among others.
- The economy has a free enterprise system, meaning that it automatically returns to a position of equilibrium by itself.
- In the occurrence of the system, the government does not intervene. The government’s role is to enforce the law and build economic supporting infrastructure.
- Sellers and buyers automatically form a market price for these goods.
- The wage rate is determined based on the law of demand and the law of supply of labor.
Classical Economics Problem
Based on the characteristics above, problems will arise in the economic system itself, including the following.
1. Production Problem
The first classic economic problem is the problem of producing a product. Producers (in this case the company) must know and predict exactly what goods and services needed by consumers are and in what quantities must be produced so that they are not too much or too little in the market.
This makes the production problem also think more about its production projections.
2. Distribution Problem
Second, handling and tackling distribution problems and ensuring that the distribution of goods to consumers can be of safe quality, on time and in the right quantity.
3. Economic Problems
And the problem that is the least accessible is when the product reaches the market, you have to know whether the product will be consumed properly and according to needs or even wasted because the market turns out to be no longer in need or even the price reaches the consumer’s hands is very high.
So, the problem is not only with producers because they are confused about production, but consumers must also be able to increase their income to be able to buy the goods that are sold and needed.
Understanding Modern Economy
In general, the modern economy is an economic system that must be able to meet unlimited human needs with limited resources, so the problem is very complex.
Modern Economic Problems
The following are some of the problems that arise in this super complex modern economy.
1. What goods and services are produced and in how much (What?)
The first modern economic problem must be closely related to the production of goods and services.
Here, producers must know to determine what goods and services must be produced with limited available resources, how large the amount of production and also at what price is right to sell.
All of this must be carefully considered because human wants and needs change rapidly, but the resources to buy them are very limited. If there is a miscalculation, producers will suffer losses, and even go bankrupt because their goods are piling up in vain.
Moreover, the era is digital and there are more and more similar products. Research is important to find out the needs in the market.
2. How to Produce The Goods (How?)
Second, after knowing the number and types of goods to be produced, the next problem is how to produce cheap and effective goods.
The available resources are very limited and producers must be able to determine the most efficient production technique for them to save production costs.
How many employees. What technique is used. In addition, producers must also be able to determine whether to produce with human power, or with the help of machines.
3. For Whom Are The Goods Produced? (For whom?)
Finally, who will enjoy the products that have been produced?
Basically, the benefits of goods and services produced are not only for consumers. But there are other parties who receive benefits.