Explain the problem of 'what to produce.

1.	Explain the problem of 'what to produce.
Answer» The first problem that an economy faces is to decide which goods and services are to be produced' Besides this, the economy also needs to decide in what quantities these goods and services should be produced. Let understand this problem with the help of the following example: Let us suppose that an economy can produce only two types of goods viz consumer goods (such as rice, wheat, Laptops, etc.) and capital goods (such as machinery, guns, bridges, etc.). Now, with the amount of resources available, the economy needs to decide how much and which of the consumer goods should be produced and how much and which of the capital goods should be produced. Thus the economy faces a choice as whether, it wants more of capital goods and less of consumer good service -versa.

Answer»

The first problem that an economy faces is to decide which goods and services are to be produced' Besides this, the economy also needs to decide in what quantities these goods and services should be produced. Let understand this problem with the help of the following example:

Let us suppose that an economy can produce only two types of goods viz consumer goods (such as rice, wheat, Laptops, etc.) and capital goods (such as machinery, guns, bridges, etc.). Now, with the amount of resources available, the economy needs to decide how much and which of the consumer goods should be produced and how much and which of the capital goods should be produced. Thus the economy faces a choice as whether, it wants more of capital goods and less of consumer good service -versa.

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