Question

The problem of “What to produce?” includes which of the following considerations?
• [(A)] Whether to produce more of food, clothing, and housing or luxury goods.
• [(B)] Whether to allocate more resources to education or military services.
• [(C)] Whether to use labour-intensive or capital-intensive production methods.
• [(D)] Whether to focus on consumption goods or investment goods. Choose the correct answer from the options below:

• A. (A), (B), and (D) only
• B. (A), (C), and (D) only
• C. (B), (C), and (D) only
• D. (A), (B), (C), and (D)

Hint:

Central problems of an economy: \[ \mathrm{What\ to\ Produce} \] \[ \mathrm{How\ to\ Produce} \] \[ \mathrm{For\ Whom\ to\ Produce} \]

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
Economics deals with the fundamental problem of scarcity—unlimited human wants versus limited resources. This leads to three central problems:
1. What to Produce: Choosing the types and quantities of goods.
2. How to Produce: Choosing the production technique.
3. For Whom to Produce: Deciding the distribution of output.
Step 2: Detailed Explanation:
The problem of "What to Produce" involves deciding the allocation of scarce resources among various alternative goods and services.
Statement (A): Choice between necessities and luxuries.
An economy must decide if it should prioritize basic needs like food and housing or luxury items. This is a direct "What to produce" decision.
Hence, (A) is correct.
Statement (B): Choice between social services and defense.
Deciding between spending on education (human capital) or military (national security) is a classic resource allocation problem. This falls under "What to produce."
Hence, (B) is correct.
Statement (C): Choice of production methods.
Deciding between labour-intensive or capital-intensive methods is about the "technique" or "process" of production.
This is the central problem of "How to produce?", not "What to produce?".
Hence, (C) is incorrect in this context.
Statement (D): Choice between consumption and investment goods.
Consumption goods satisfy current wants, while investment (capital) goods are used for future production. The trade-off between current and future growth is a "What to produce" concern.
Hence, (D) is correct.
Step 3: Final Answer
The considerations (A), (B), and (D) relate to the choice of products, while (C) relates to the choice of technique. Therefore, option (A) is correct.