Question

Explain the problem of "how to produce".

Answer 1

The central problem of 'How to Produce' deals with which production technique to employ in the production of the decided goods and services. That is, whether to employ labour intensive technique or to employ capital intensive technique of production. Here, the economy needs to decide which particular production technique should be adopted in order to utilize its available resources in the best possible efficient and optimal manner. India, for instance, is a labour abundant country. Thus, it will be more beneficial for India to opt for labour intensive techniques, as this will not only minimise the cost of production (due to cheap availability of labour) but will also help in reducing unemployment.