CBSE Class 12-commerce Answered
Explain the central problem of 'what to produce'. How is the problem solved under market economy?
Asked by subhashmaurya9628 | 05 Mar, 2019, 08:20: PM
Expert Answer
The central problem of 'What to produce' can be explained as follows:
- The problem of what to produce arises due to the scarcity of resources in the economy. It is associated with:
What goods and services are to be produced?
In what quantity are they to be produced. - The problem of choice of what to produce is made between capital goods which are essential for increasing production and consumer goods which are essential for people to enjoy a better life.
Under the market economy the decision of what to produce is solved where:
The producers will produce those goods in which there is more demand and less supply in this case for such goods they can charge higher prices and earn more priofits.
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