Question

The decision of whether to produce more consumption goods or more investment goods, to boost future production and consumption, relates to which central problem of an economy?

• A. Why are these goods produced?
• B. For whom are these goods produced?
• C. How are these goods produced?
• D. What to produce and in what quantities?

Hint:

Whenever the question asks about choosing between different goods or deciding the quantity of each good, it refers to the central problem: \[ \text{What to produce and in what quantities?} \]

Answer 1

The Correct Option is D

Concept:
Every economy faces the basic problem of scarcity. Scarcity means resources are limited, but human wants are unlimited. Due to limited resources, an economy cannot produce everything in unlimited quantity. Therefore, every economy has to make choices. The main central problems of an economy are: \[ \text{What to produce?} \] \[ \text{How to produce?} \] \[ \text{For whom to produce?} \]

Step 1: Understand consumption goods.
Consumption goods are goods that are used directly by consumers to satisfy their wants. Examples of consumption goods are: \[ \text{Food, clothes, mobile phones, television, furniture} \] These goods satisfy present needs of people.

Step 2: Understand investment goods.
Investment goods are goods that are used to produce more goods in the future. Examples of investment goods are: \[ \text{Machines, tools, factories, equipment} \] These goods help in increasing future production capacity.

Step 3: Understand the choice involved.
The question asks whether the economy should produce more consumption goods or more investment goods. If more consumption goods are produced, people will get more goods for present consumption. But fewer resources may be left for investment goods. If more investment goods are produced, future production capacity will increase. But present consumption may be reduced. Thus, the economy must decide: \[ \text{Which goods should be produced?} \] and \[ \text{How much of each good should be produced?} \]

Step 4: Relate it to the central problem.
The problem of choosing between consumption goods and investment goods is related to the central problem: \[ \text{What to produce and in what quantities?} \] This is because the economy is deciding the type of goods and their quantities.

Step 5: Check the options.
Option (A) asks why goods are produced. This is not a main central problem of an economy. Option (B) asks for whom goods are produced. This is related to distribution of goods among people. Option (C) asks how goods are produced. This is related to the technique of production. Option (D) asks what to produce and in what quantities. This directly matches the given situation.

Step 6: Final conclusion.
The decision between producing consumption goods and investment goods is the problem of choosing what to produce and in what quantities. Hence, the correct answer is: \[ \boxed{\text{(D) What to produce and in what quantities?}} \]