Explain the central problem of ‘for whom to produce’.

OR

Explain the central problem of ‘choice of technique.’

Production, consumption, distribution, and exchange are basic economic activities. Central problems are concerned with the use of material resources to satisfy human wants. The main reasons for the occurrence of central economic problems are:

• Unlimited human wants

• Limited availability of resources

• Alternative uses of resources

This results in a situation of how to use scarce resources to attain maximum satisfaction. These problems are generally called the ‘central economic problems.’ It is faced equally by every economy- whether developed or developing.

All wants cannot be satisfied. Hence the society should decide who should get how much from the total goods and services produced; who gets more and who gets less. The central problem of ‘for whom to produce’ basically revolves around deciding on how does the total production of the economy is to be distributed between individuals. It includes the distribution of both goods and services. The society also should decide whether there should be a minimum level of consumption for everyone in society.

OR

Production, consumption, distribution, and exchange are the basic economic activities. Central problems are concerned with the use of material resources to satisfy human wants. The main reasons for the occurrence of central economic problems are:

• Unlimited human wants

• Limited availability of resources

• Alternative uses of resources

This results in a situation of how to use scarce resources to attain maximum satisfaction. These problems are generally called the ‘central economic problems.' It is faced equally by every economy- whether developed or developing.

The society has to decide on the combination of resources that it will use for production. This is depicted in the problem of ‘choice of technique’ or ‘how to produce.’ The society must choose the method of production of goods and services- to use more labour (labour intensive) or more capital (capital intensive). This will depend on the availability of supplies of different factors of production and their relative prices.

Production should be carried out by the most efficient method, or the output will be smaller and result in wastage of resources. Society should make use of more abundant factor and reduce the use of scarce factor for efficient production.