Why does the problem of how to produce arise??

Dear Student,
The problem of how to produce is the problem which is related to the selection of technique that can be used for the production of goods and services. This problem arises because in our economy there are two techniques for production of goods which are Labour intensive techniques that involves labour and Capital intensive techniques involves machinery and plant. Labour intensive technique promotes efficiency and capital intensive reduces the cost of production but capital intensive techniques requires large amount of money to be invested in it. The producers therefore faces the problem of how to produce because he want less cost of production and more efficiency.


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Broadly there are two categoris labour intensive and capital intensive.
​Labour intesive implies greater use of labour than capital.
​whereas capital intensive implies greater use of capital than labour.
​Labour intensive technique promotes effeciency where as capital intensive reduces cost
the problem of how to produce arises because producers want to reduce their cost and maximise
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Because of scarcity of resources and technology.
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