Every economy has limited resources, while human wants are unlimited. Resources such as land, labour, capital and entrepreneurship are scarce and have alternative uses. Therefore, an economy has to make choices about how its available resources should be used. This gives rise to the fundamental or central problems of an economy. 1. **What to Produce and in What Quantity?** The first central problem is deciding which goods and services should be produced and in what quantities. Since resources are limited, an economy cannot produce unlimited amounts of all goods. It has to choose between consumer goods and capital goods, necessities and luxuries, and different types of services. For example, an economy may have to decide whether more resources should be used to produce food, clothing, hospitals, schools or machinery. The choice depends on the