Animated representation of the different modes of production The three fundamental questions in economics are all these, except _____ Question 2 Options: How to produce. Produce for whom. What to produce. When to produce. The quantity in which a good is to be produced is determined at the level at which demand equals supply. If the quality produced is more or less good, there will be an imbalance in the market and the price fluctuates. Therefore, in order to maintain a stable equilibrium price, it is necessary to equalize supply and demand. This rule applies to all goods. In this way, the first central problem is solved. In short, an economy must distribute its resources and choose among different potential bundles of commodities (What to produce), choose among different production techniques (How to produce) and finally decide who consumes the goods (For whom produces). In this context, it says: “What techniques should be used?” Technology means the right ratio in which the different factors of production are to be used. There are two types of techniques.
A labour-intensive technology would use relatively more labour and less capital. On the other hand, capital-intensive technology means more capital and less labor. The three fundamental questions in economics are option A, option B and option C, and we have to choose between them. How to make option at home to make options, seawater products and option D. To produce something, we need resources, but there is a shortage of resources in our economy, so the manufacturing society must answer three fundamental questions, namely, what to produce, how to produce and how to produce at home. Trying consumer goods or capital goods, drying up the labor-intensive method or the capital-intensive method, and choosing to produce more for the rich or less for the poor are related to these issues. Then it will be. There are different needs of each person in society, as it is decided which goods and services are produced and in what quantity they are needed in society. Since resources are scarce, producing one means sacrificing the other.
Production must be done in such a way that society gets maximum satisfaction by looking at what is more important than another. Goods can be produced in-house or in a foreign country. Internal production means job creation, while foreign land-based production means the production of goods at a lower price. All these aspects must be considered in the light of their impact on society. This problem is related to the selection of the category of people who will ultimately consume the goods, i.e. whether the goods should be produced for more poor and less rich or richer and less poor. Since resources are scarce in all economies, no society can meet all the needs of its people. This creates a problem of choice. Consider the first question: “What goods to produce and in what quantities? Goods that do not reach positive market prices would not be produced.
Therefore, only goods with positive prices should be produced, and in such a way that markets are compensated. Every society is faced with the scarcity of resources due to their limited availability, which leads to the allocation of scarce resources in such a way as to achieve the maximum satisfaction of human needs. Resource allocation raises the fundamental problem of the economy, which deals with the production, distribution and sale of goods and services, also known as the central problem of the economy. These can be studied by knowing: the solution to this problem is that very simple goods can only be consumed by people who have more purchasing power. The price mechanism determines the income of employees, i.e. purchasing power. The purchasing power of the owner of capital is determined in the same way. Therefore, if the price of each commodity and each factor of production is determined, the third problem will be solved. For example, textile production can be done either by hand or by machine.
The method that provides more power at a lower cost is chosen. In a country like India, where there is an abundance of labor, the loom by hand can be chosen, while in countries like the United States, where labor costs are high, the production of machinery is preferred. (ii) How much to produce: After deciding which goods to produce, the economy must determine the quantity of each product to be selected. This means when it comes to deciding how much to produce, consumer and capital goods, civilian and war goods, etc. (i) What are the possible commodities to produce: An economy must decide which consumer goods (rice, wheat, clothing, etc.) and which of the capital goods (machinery, equipment, etc.) to produce. Similarly, the economy must choose between civilian goods (bread, butter, etc.) and war goods (guns, tanks, etc.). The choice of technique depends on the prices of the factors of production. In other words, if labour is cheap and capital is expensive, labour-intensive technology would be considered, and vice versa. The prices of labor and capital are determined by the demand and supply of labor or capital. In this way, the second problem is solved.
For example, sorted rice production is for people with higher creditworthiness and unsorted rice production for low-income people. Luxury goods and services are for high-income people. The central problems of what and how much should be produced; How and for whom is produced is determined by the mechanism of free prices. This helps to understand what goods or services are needed in society (what should be produced?), what technology should be used to produce them (how to produce?) and who would consume these goods (produce for whom?). For example, the production of more sugar is only possible if the production of other goods is reduced. The production of more war goods is only possible if the production of civilian goods is reduced. Based on the importance of different goods, an economy must therefore decide which goods should be produced and in what quantities. It is a problem of the distribution of resources between different goods. Goods are produced for people who have the ability to pay. People`s ability to pay for goods depends on their income level. This means that this problem concerns the distribution of income among the factors of production (land, labour, capital and enterprises) that contribute to the production process. The aim is to determine the share of the various factors of production in the country`s total national product.
