Explain the central problem of “choice of technique”.

ANSWER: The problem of how to produce refers to selection of technique to be used for production of goods and services. Generally, there are two types of techniques :

  • Labour intensuve technique – where more of labour and less capital is used.
  • Capital intensuve techique – where more of capital and less of labour is employed.

So decision has to be made between these in such a manner ao that maximum output is produced at minimum cost, using least possible scarce resources.

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