Which of the following is not the central problem of the economy?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Why are the goods produced?
Every economy has limited resources, so it must decide how to use them. These decisions are the central problems of an economy: what to produce, how to produce and for whom to produce.
Option (1) Why are the goods produced? — Not a central problem (Correct). An economy produces because people’s wants have to be satisfied. The problem is how to use scarce resources for that, and the three decisions settle it.
Option (2) What to produce? — Central problem (Incorrect). This is the choice of which goods and how much of each, such as more food or more clothing.
Option (3) How are the goods produced? — Central problem (Incorrect). This is the choice of technique: more labour and less machinery, or the reverse.
Option (4) For whom are the goods produced? — Central problem (Incorrect). This is the question of how the output is shared among people.
NCERT (2026-27): “1.2 Central Problems of an Economy Production, exchange and consumption of goods and services are among the basic economic activities of life. In the course of these basic economic activities, every society has to face scarcity of resources and it is the scarcity of resources that gives rise to the problem of choice. The scarce resources of an economy have competing usages. In other words, every society has to decide on how to use its scarce resources. The problems of an economy are very often summarised as follows:… What is produced and in what quantities? Every society must decide on how much of each of the many possible goods and services it will produce.… …How are these goods produced? Every society has to decide on how much of which of the resources to use in the production of each of the different goods and services. Whether to use more labour or more machines. Which of the available technologies to adopt in the production of each of the goods?… …For whom are these goods produced? Who gets how much of the goods that are produced in the economy? How should the produce of the economy be distributed among the individuals in the economy? Who gets more and who gets less?…” |