Every economy has to face some fundamental (basic) problems which are known as central problems. These are :
(i) What to produce?
(ii) How to produce? and
(iii) For whom to produce?
The first problem, vi.z., what to produce, has two parts. The first part deals with what is to be produced under given circumstances. The second part is concerned with the quantities of goods to be produced. The second problem relates to the methods of production. And the third problem relates to the distribution of national product.