Explain how to produce as central …

How to produce?

This aspect deals with the process or technique by which the goods and services can be produced. Generally, there are two techniques that can be used for producing, which are:

1. Labour Intensive Techniques
2. Capital Intensive Techniques

The choice of technique for production depends on the availability of the resource in that nation, and hence resource allocation becomes a challenge.

An economic problem generally means the problem of making choices which occurs because of the scarcity of resources. The economic problem arises because people have unlimited desires but the means to satisfy that desire is limited. Therefore, satisfying all human needs are difficult with limited means.

Causes of Economic Problem

• Scarcity of Resources- Resources like labor, land, and capital, etc. are insufficient as compared to the demand. Therefore, the economy cannot provide everything that people want.
• Unlimited Human Wants- Human beings demands and wants are unlimited and never ends, which means they will never be satisfied. If a person one wants is satisfied, they will start tempting some new desires. People wants are unlimited and keep multiplying, therefore, cannot be satisfied because of limited resources.
• Alternative Uses- Resources being scarce they are put into different uses. So, to make a choice among resources are essential. For instance, petrol is not only used in a vehicle but it is also used for generator, running machine, etc. So, now the economy should make a choice within the alternative uses.