Explain the problem of what to produce. 4. Explain the Problem of 'What to Produce 2022-10-14
Explain the problem of what to produce Rating:
The problem of what to produce is a fundamental economic issue that arises in any economy, whether it is a small village or a large, complex modern society. This problem arises because resources are limited, but human needs and wants are unlimited. Therefore, we must make choices about how to allocate our resources in order to produce the goods and services that we value most.
One way to understand the problem of what to produce is through the concept of opportunity cost. Opportunity cost refers to the next best alternative that must be given up in order to pursue a particular course of action. For example, if a farmer decides to grow corn, they are giving up the opportunity to grow other crops or engage in other activities with their land and resources. The opportunity cost of growing corn is the value of the next best alternative that the farmer must forego.
In a market economy, the problem of what to produce is largely solved through the price system. Prices reflect the relative scarcity of different goods and services, and they provide an incentive for producers to produce the goods and services that are in high demand. For example, if the price of corn is high, it may be more profitable for a farmer to grow corn rather than another crop. Similarly, if the price of a particular good or service is low, it may not be worth the effort and resources to produce it.
However, the price system is not perfect, and there are cases where it may not accurately reflect the true value of a good or service. For example, externalities are costs or benefits that are not reflected in the price of a good or service. For example, if a factory produces pollution as a byproduct of its production process, the cost of this pollution is not reflected in the price of the factory's products. This can lead to a situation where the factory is producing too much of the good, from a societal perspective.
In addition to externalities, there are other factors that can influence the problem of what to produce. For example, governments may use various tools, such as subsidies and taxes, to influence the production of certain goods and services. Governments may also have specific goals or objectives, such as promoting economic growth or protecting the environment, that may influence their production decisions.
In conclusion, the problem of what to produce is a complex and ongoing issue that arises in any economy. It involves making choices about how to allocate limited resources in order to produce the goods and services that we value most. The price system is one way to solve this problem, but it is not perfect and there are other factors that can influence production decisions.
What to Produce, How to Produce and For Whom to Produce
Availability of Resources: Availability of resources also play a vital role in such a decision. As we know central problem deals with the production and allocation problems related to the resources so we can infer that it solves the central problem of an economy by the production of two goods using sufficient resources and technology. This is inevitable as excess production may lead to the problem of overproduction and further to wastage of resources, and less production may lead to scarcity of the product which may further lead to the problems likeinflation etc. This is a major reason why luxury goods are usually being produced by private investors and necessities are usually produced by the government. Lesson Note Subject: Economics Topic: Basic Economic Problem of the Society. The distribution of the final goods and services is equivalent to the distribution of National Income or National Product among the factors of production such as land, labour, capital and entrepreneur. In such a case, the process is said to be superior to other processes.
Explain the problem of what to produce with the help of ppc
Answer: Explanation: PPC refers to Production Possibility Curve. Thanks for stopping by. It must be understood that the decision to produce for a particular group of people by the private investor is essentially a function of the purchasing power of such a group. At such a point, consumption efficiency is achieved. There are two types of techniques.
These can be studied by knowing: A pictorial representation of The Economic Problem What to produce? What to produce This is borne out of the limited wants due to limited resources. This rule is applicable for each commodity. Lesson Objectives: by the end of the lesson the learners should be able to; 1. A favourable production function will ensure large production of goods to meet the demands of the customers. Choice of technique could be said to be essentially a technical question, but in making a choice, economic considerations must come in. Accordingly, the economy will move higher and closer to initial PPC. But in the strict economic sense, price remains a cardinal factor in the choice of the commodity to produce.
There are instances where more than one efficient process are available in production, the choice of an efficient process in such a case becomes an economic decision. All these aspects need to be seen keeping in mind their effect on society. The problem for whom to produce refers to selection of the category of people who will ultimately consume the goods. Accordingly, both the guns and bread are to be produced. These ventures are capital intensive and the absence of fund may rule out their production. In other words, a process will be used or chosen if it produces a given output using the least amount of input. Production Function: This involves any analysis which shows the possible quantity of goods by using each of the given alternative combination of resources that produces the largest quantity of output at the lowest unit of cost of production.
What to Produce, How to Produce and For Whom to Produce
You can connect with her via her contact page. Factors Which Determine What to Produce Consumers Needs: The producers will have to consider the needs of the consumers. Accordingly, both the guns and bread are to be produced. Factors Which Determine For Whom To Produce The following factors must be considered when determining who to produce: Satisfaction of Wants: All the goods and services produced either by individuals, firms or government must satisfy the needs or wants of the society. Type of Economy: the type of economic system in a given society determines the type and quantity of goods and services to be produced. ADVERTISEMENTS: The Central problems of what and how much to produce; how to produce and for whom to produce are determined by the free price mechanism.
Explain the problem ‘what to produce’ with the help of an example. Does it arise in every economy?
The problem can be categorised under two main heads: i Personal Distribution: It means how national income of an economy is distributed among different groups of people. And this causes the concave shape of PPC. The fund is not just there and where such a fund is present, the technology is absent. Distinction between Microeconomics and Macroeconomics. Lesson Summary Aids: See reference materials below content. Sometimes, the fund may be available but the appropriate technology is just not present and importation or purchase of foreign technology may prove expensive and illogical.
Basic Economic problem of the society: what to produce, how to produce, for whom to produce, efficient use of resources, determining factors.
Efficiency Of Resources Use In production, efficiency of resources used refers to the optimum use or combination of factors of production to achieve higher and better output at a reasonable cost. The method which gives more output with lesser cost getting involved is chosen. An animated depiction of For Whom to Produce with example This involves deciding who is the end consumer of the goods or services that are produced. Example is the generation of electricity using nuclear powered turbines in less developed countries. This movement is being depicted in the below graph with the help of the arrow from point P. Assuming technology to be constant, we can utilize resources entirely for the production of say guns and produce 500 guns, or utilize these resources entirely for the production of say bread and produce 500 tons of bread.
Explain what is meant by the problem of what to produce, how to produce, and for whom to produce.
The quantity in which a commodity is to be produced is set at that level where demand equals supply. As we move down along the PPC, to produce each additional unit of Good X, more and more units of Good Y needs to be sacrificed. . Because firms are constrained by unavailability of resources which include fund, it must make decisions on what to produce. A public park or a school can be built on the same land, one has to decide what needs to be built by studying which is a more important need of the area. Production has to be done in a way that maximum satisfaction is achieved by society by looking into what is more important than another.