Question

Ramesh decided to take all decisions related to production such as what and how to produce​

Answer 1

ANSWER →

Ramesh has to decide the central problems of an economy so we will solve it as follows

CENTRAL PROBLEM OF ECONOMY→

• What to produce +How much to produce .

• How to produce
• For whom to produce .

1. What and How much to produce

The first and foremost problem of every economy is worth goods and services should be produced to satisfy the maximum wants of the people. This problem arise due to fact that means are scarce in relation to their wants.

Firstly the economy has to decide word goods and services like consumer goods capital goods peacetime goods or time goods to be produced.

And secondly the economy has to decide that what proportion of the consumer goods will be produce and what proportion of the capital goods will be produced.

2 How to produce -

The second problem of economy is how to produce or how to organise production there are two forms of production. .

Labour intensive technique.

Capital intensive technique .

If the producer want to give more and more employment to the people of its surrounding for the economy is centrallycentrally planned economy then the producer will use labour intensive technique .

If the economy is market economy of the producer want to maximize profit and he will employ the capital intensive technique.

3 For whom to produce

Owing to limited records resources an economy cannot produce goods for all section of the society. The society is broadly divided into two sections

Poor section

Rich section

If the producer want to maximize profit then he will produce goods for rich section .

If he wants to do social welfare then he will produce goods for poor section.

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