How to Produce - This problem relates to selection of the technique of production of goods. Generally, most of the goods can be produced by using more than one technique. Mainly there are two techniques: labour intensive technique (a technique in which more labour and less capital is used) and capital intensive (a technique in which more capital and less labour is used). Since the resources are scarce, so a decision is to be taken that which technique to be used.
For example, cloth can be produced with labour intensive technique as well as capital intensive technique. Which technique to choose is the problem of ‘how to produce’.
