Explanations:The central problems of an economy are fundamental issues that arise due to the scarcity of resources and the unlimited wants of individuals. These problems can be categorized into three main questions: what to produce, how to produce, and for whom to produce. Each of these questions addresses a different aspect of economic decision-making.
The "what to produce" problem deals with the allocation of resources to the production of different goods and services. It involves deciding which goods and services should be produced in an economy, given the limited resources available. This decision is crucial because it determines the mix of products that will be available to consumers and the overall composition of the economy's output.
The "how to produce" problem, on the other hand, is concerned with the methods and techniques used to produce the goods and services that have been decided upon. This includes decisions about the use of technology, labor, capital, and other inputs in the production process. The choice of technique of production is a key aspect of the "how to produce" problem. It involves selecting the most efficient and cost-effective methods to produce the desired goods and services.
The "for whom to produce" problem addresses the distribution of the produced goods and services among different individuals or groups in society. It involves deciding who will receive the output of the economy and in what quantities. This problem is closely related to issues of income distribution and social welfare.
In the context of the question, the statement "What to produce is the central problem of choice of technique of production" is incorrect. The choice of technique of production is a part of the "how to produce" problem, not the "what to produce" problem. The "what to produce" problem is about deciding which goods and services should be produced, while the "how to produce" problem is about the methods and resources used to produce those goods and services.
Understanding these distinctions is crucial for comprehending the complexities of economic decision-making and the allocation of resources in an economy. Each of the central problems requires careful consideration and planning to ensure that the economy operates efficiently and meets the needs of its population.