Question

1. What products to produce? (the right selection of products to satisfy the needs and wants of individuals)

Answer:

2. How to produce? (the technology of production)

Answer:  

3. For whom to produce? (the distributional tasks)

Answer:  

4. Why is the study of economics an important part of social science? Give an example from the real world.

Answer 1

Q : What products to produce ?

This is one of the central problems of economics. The goods and services that is having positive prices will only be produced in the market and the production will be in such a way that the market will be cleared. Thus products which is not having a positive price in the market will not be produced. How much quantity to be produced is determined by the forces of demand and supply. The level of quantity to be produced will be decided at the point were demand and supply equals. This way, the first central problem in the economy will be solved.

Q : How to produce ?

With this question it means that what technology must be used in production of products. The exact proportion of employing the factors of production can be termed as technology. There are basically two types of production techniques. They are labour intensive technique and capital intensive technique. Labour intensive technique involves more of labour and only less capital will be used in production. Similarly , capital intensive technique involves more of capital and less of labour in production. Thus the proportion of the factors of production must be in such a way that maximum output at minimum cost can be produced.

Q : For whom to produce ?

This question means that, to select the type of consumers who will consume the final goods. This question can be solved very easily. Consumers with purchasing power can consume the goods produced in the economy. The ability to pay of a consumer is determined by his income. The producers purchasing power for factors of production is also determined by his income.