Which of the following is central problem of economy?
I. What is produced and in what quantities?
II. How are these goods produced?
Show answer & explanation
Correct answer: C
Explanation
Correct Answer:
Option 3: Both I and II
Explanation:
The central problems of economics arise due to the scarcity of resources and the unlimited nature of human wants. Therefore, it becomes essential to decide what to produce and in what quantity (What to produce), as well as how to produce it (How to produce). Both of these questions are fundamental to every economy. Furthermore, there is a third problem: 'For whom to produce.' The resolution of these problems forms the basis of economic policies.
Potential Questions for Upcoming Exams:
Question: What is the third central problem of economics?
Answer: For whom to produce
Question: What is the nature of resources?
Answer: Scarce (Limited)
Question: What is the nature of human wants?
Answer: Unlimited
Question: What is the main objective of economics?
Answer: Optimal utilization of resources