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Introduction

Question
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Explain the problem 'How to produce'.

Solution

The central problem 'How to Produce' is the problem of choosing the appropriate technique of production for producing goods. There can be more than one method for producing a good. More labour and less capital (i.e., labour intensive technique) or more capital and less labour (i.e., capital intensive technique) can be used for the production of a good. Since resources are scarce, a decision has to be taken about which technique should be used on the basis of availability of resources.

Example: A given quantity of cloth can be manufactured by combining factors of production in different proportions, making it capital-intensive or labour intensive method.

Some More Questions From Introduction Chapter

Briefly state meaning of the following terms as used in economics.
1. Economy (D 2010 C), 2. Goods, 3. Services, 4. Wants, 5. Resources,
6. Households, 7. Firms, 8. Commodities, 9. Production, 10. Consumption

Explain central problems with the help of PP curve. How does PP curve help in explaining the central problems?

(i) Why is PP curve downward sloping from left to right?    (D 2006C)

(ii) Why does PP curve look concave to the origin? 

Can the PP curve shift?

State factors which cause rightward (upward) shift of PP curve.

 How is PPC affected by unemployment in the economy? Explain.

Massive unemployment shifts the PPC to the left. Defend or refute.

What is meant by resources?

What do you understand by the term 'individual' in economics?

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