ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What to produce: The first problem of every economy is what goods and services should be produced so as to satisfy the maximum wants of the people. Then it has to decide about its quantity, how much of consumer goods and how much of capital goods are to be produced.

Detailed explanation-2: -The quantity in which a commodity is to be produced is set at that level where demand equals supply. If quality produced is more or less, then there will be dis equilibrium in the market and price will fluctuate. Hence, to maintain stable equilibrium price it becomes necessary to make demand and supply equal.

Detailed explanation-3: -The ‘what is produced and in what quantities’ problem that an economy faces is to decide which goods and services are to be produced. Besides this, the economy also needs to decide in what quantities these goods and services should be produced. For instance, if an economy can produce only two types of goods viz.

Detailed explanation-4: -This refers to different aspects of production from selecting which raw materials to be used, what technique of production has to be adopted, and where these goods would be produced.

Detailed explanation-5: -In economics, factors of production are the resources people use to produce goods and services; they are the building blocks of the economy. Economists divide the factors of production into four categories: land, labor, capital, and entrepreneurship.