What to Produce - It is the problem of selection of goods. It has two aspects- what commodity is to be produced and in what quantity.
This problem arises because economy has to produce so many types of goods like consumer goods - capital goods, war goods - civil goods, necessity goods - luxury goods etc. An economy has limited resources and the wants are unlimited, so all goods and services cannot be produced. Therefore, economy has to decide which goods are to be produced. The decision is generally depend on the demand of the society.
For example, on a given piece of land, all crops cannot be grown. If it is used for growing wheat, then on the area on which wheat is grown other crops cannot be grown. This is the problem of what to produce.
