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Explain the central problem of “choice of technique”. |
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Answer» “How to produce” is the problem related to the allocation of resources. It arises due to the fact that every economy has limited resources in relation to its wants. Goods can be produced in more than one way. Production techniques may be either labour intensive or capital intensive. An economy will opt for the technique which uses the least amount of scarce resources for a given quantity of output. For example, a given amount of foodgrains can be produced either by using more capital and less labour or less capital and more labour. The guiding principle is to adopt that technique which causes least possible cost to produce per unit of commodity. In India, labour intensive technique will be preferred because of availability of labour and scarcity of capital. |
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