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.