in allocation of resources how economy deals with how to produce .is economy chose about the technique only on the basis of minimal cost of production or more factors are involved ????
Answers
Answer:
Wheat, cloth, roads, television, power, buildings, and so on. Once the nature of goods to be produced is decided, then their quantities are to be decided.
How many kilos of wheat, how many million metres of cloth, how many kilometers of roads, how many televisions, how many million kw of power, how many buildings, etc. Since the resources of the economy are scarce, the problem of the nature of goods and their quantities has to be decided on the basis of priorities or preferences of the society.
If the society gives priority to the production of more consumer goods now, it will have less in the future. A higher priority on capital goods implies less consumer goods now and more in the future. This problem can be explained with the help of the production possibility curve, as shown in Figure 1.
Capital Goods and Consumer Goods
Suppose the economy produces capital goods and consumer goods. In deciding the total output of the economy, the society has to choose that combination of capital and consumer goods which is in keeping with its resources. It cannot choose the combination R which is inside the production possibility curve PP because it reflects economic inefficiency of the system in the form of unemployment of resources.
Nor can it choose the combination К which is outside the current production possibilities of the society; the society lacks the resources to produce this combination of capital and consumer goods. It will have, therefore, to choose among the combinations В, C, or D which give the highest level of satisfaction.
If the society decides to have more capital goods, it will choose combination В; and if it wants more consumer goods, it will choose combination D.
As a matter of fact, consumers have to pick and choose from the vast variety of goods offered to them. The urgency of desire for certain goods means that the consumers are prepared to pay a large sum of money and higher prices. It implies larger profits for producers producing these commodities. If consumers desire goods less urgently, it shows their reluctance to spend more on them and they offer lower prices.
Explanation:
Answer:
Refer to the attachment
