Whether to use more resources in education and health or to use more resources in building military services. Which of the central problems of an economy is accurate for this?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → What to produce?
Resources are scarce and have alternative uses, so every society faces three central problems: what to produce, how to produce and for whom to produce. Deciding how much of each possible good and service to produce, and so how to divide resources among them, is the problem of what is produced and in what quantities. A choice between using more resources in education and health and using more in building military services is a choice of that kind.
Why the other options are incorrect
Option (1) How to produce? — Incorrect. This problem is about which technique to use for a good already chosen, for example more labour or more machines.
Option (3) For whom to produce? — Incorrect. This problem is about who gets how much of the goods produced, how the output is distributed among people.
Option (4) Where to produce? — Incorrect. The place of production is not one of the three central problems of an economy.
NCERT (2026-27): “1.2 Central Problems of an Economy … Every society must decide on how much of each of the many possible goods and services it will produce. Whether to produce more of food, clothing, housing or to have more of luxury goods. Whether to have more agricultural goods or to have industrial products and services. Whether to use more resources in education and health or to use more resources in building military services. Whether to have more of basic education or more of higher education. Whether to have more of consumption goods or to have investment goods (like machine) which will boost production and consumption tomorrow.…” |