The difficulty of economic decision making is based on the fact that resources are limited and human needs are unlimited. Societies must continue to answer three fundamental questions: what to produce, how to produce it, and for whom to produce it. Different economic systems have different ways of answering these three questions, which leads to give or take, the conflict in making decisions.
For example, for the question “What to produce?”. To consider this in a market economy, it is rely on supply and demand decisions. For instance, If consumers prefer to buy cell phones rather than buying TVs, companies will invest most of the resources in producing more cellphones. But the problem, however, is that the market will not always ensure that what society needs most is produced. In command economy, it is centralizing by government decisions on what to produce. For a case in point, the Government may impose a focus on the production of military industries or food. This may meet national strategic needs, but is likely to lead to waste and shortage of resources. For the mixed economy, it is dominated by the market, but the government will be involved in health care, education, infrastructure, and so on. This balances efficiency and social benefits, but at the same time can be more complex in terms of policy. Lastly, for the traditional economy, instead, decisions about what to produce are based on customs or the ways of the ancestors, for example, hunting or farming continue to dominate in the tribal societies. This ensures stability, but lacks flexibility and innovation.