... next best alternative.For example,the opportunity cost of using a certain raw material might be another raw material.Because resources are scarce and the opportunity cost is involved,society must make the most of the resources as they are being main(optimization),and decide how to allocate them to different uses.The function of an economy therefore,is to aim to maximise utility of scarce resources.The three issues then,are what to produce,how to produce them and for whom to produce.There are two solutions to the central economic problem,the free-market & command methods.Both have had varying levels of success. The main actors in planned economies are the government,the consumers and the workers.Therefore,the motivational basis of the command system,is the individuals' good will toward others,not their own self-interest.In principle,society decides what,how,and for whom to produce.Under a planned economy,the state owns all means of production apart from labour. Ideally this system aims to plan the input and output of resources flowing in ...

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