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How To Know What To Produce, How much to produce And How To Produce.

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Firms, households and the government are faced with the problem of deciding on the types of goods and services to produce for society.

In relation to this a vital question has to be answered;

What determines the allocation of productivity resources in an economy? This question of resources allocation is important because productive resources are scarce and have competing uses. If more resources are used to produce one kind of goods, there would be less for the others.

How to know what to produce.

The types of goods and services which will be produced depend, among other things, on the needs of the society and available human and material, Finance resources.

Producers producers things which are required; Otherwise resources will be wasted.

Also, it is only those wants for which there are the means of production that can be produced. If Book and musical entertainment are required, they will be produced, provided there is day wherewithal to do so.


Another vital question which the economy or producer has to face is - In what quantities should each type of goods and services be produced? 


The quantity that will be produced depends on the quantity of each kind of goods and services required by society. It will also depend on the availability of the productive resources, as well as on the efficiency of the productive input, including Finances

Those goods and services which are in high demand will be produced in larger quantities provided that there are sufficient resources to do so. 

If book is required in a small quantity less of it will be produced even if there are enough resources to produce more. Again, even if it is in high demand a small quantity will be produced when there are insufficient resources.

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Society and producers have to decide on the method or technique to use to produce the required goods and services. This basic problem arises if there is more than one way in which it is technically possible to produce a commodity.

They have to answer the question; what quantities of land labour and capital should be combined to produce the required goods and services?  

It is possible to use elder a more labour-intensive or a more capital-intensive technique to produce a given quantity of output. Should be more capital and the less labour be used in production? It is possible for example, to achieve equal amount of output by cultivating a small piece of land and applying larger quantities of fertilizer labour and machinery or by cultivating a large piece of land and using smaller quantities of fertilizer labour and other output. 


The technique of production will depend on the availability of the factors of production their relative costs and the nature of the Enterprise. List of discuss factors will be used by more of those which are available in larger quantities will be used.


 Questions relating to the technique of production are dealt with the theory of production.

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