Question

Explain the central problem of "What is produced and in what quantities.".

Answer 1

The ‘what is produced and in what quantities’ 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. For instance, if 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.). Then, with the amount of resources available, the economy need 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 goods or vice-versa.