Question
Explain the problem of ‘what to produce’.

Answer

The economy can produce different possible combinations of the goods and services from the given resources.
The problem is that which of these combinations should the economy produce. This is the problem of choice. If more of one good is produced, then lesser resources are left for producing other goods.

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Similar questions

The value of marginal propensity to consume is 0.6 and initial income in the economy is ₹ 100 crores. Prepare a schedule showing Income, Consumption and Saving. Also show the equilibrium level of income by assuming autonomous investment of ₹ 80 crores.
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S.No.
Contents
(in crore)
$(i)$
Value of Output in Economic Territory
$4,100$
$(ii)$
Net Exports
$(-)50$
$(iii)$
Intermediate Purchase by Primary Sector
$600$
$(iv)$
Private Final Consumption Expenditure
$1,450$
$(v)$
Intermediate Purchases by Secondary Sector
$700$
$(vi)$
Government Final Consumption Expenditure
$400$
$(vii)$
Net Domestic Fixed Capital Formation
$200$
$(viii)$
Intermediate Purchases by Tertiary Sector
$700$
$(ix)$
Net Change in Stock
$(-)50$
$(x)$
Net Indirect Taxes
$100$
$(xi)$
Consumption of Fixed Capital
$50$
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From the following data, calculate National Income by
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  2. Expenditure method.
S. No.
 
(₹in Lakhs)
$(i)$
Current transfers from rest of the world.
$100$
$(ii)$
Government final consumption expenditure.
$1,000$
$(iii)$
Wages and salaries.
$3,800$
$(iv)$
Dividend.
$500$
$(v)$
Rent.
$ 200$
$(vi)$
Interest.
$150$
$(vii)$
Net domestic capital formation.
$ 500$
$(viii)$
Profits.
$ 800$
$(ix)$
Employers' contribution to social security schemes.
$ 200$
$(x)$
Net exports.
$(-)50$
$(xi)$
Net factor income from abroad.
$(-)30$
$(xii)$
Consumption of fixed capital.
$40$
$(xiii)$
Private final consumption expenditure.
$4,000$
$(xiv)$ Net indirect tax. $300$
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  3. Interest received by an Indian resident from firms abroad.
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