Answer to Question #192434 in Microeconomics for Joe Joe

Question

What is an example of a "how" question? (In terms of the 3 economic question?)

Answer 1

How to produce: In this case, it's a question of "the techniques should be used." The correct proportion of the various factors of production to be used is referred to as technology. Techniques are divided into two categories. A labor-intensive technique will use more labor and less resources than a capital-intensive technique. Capital-intensive techniques, on the other hand, require more capital and less labor.

The technique chosen is determined by the cost of the production factors. That is, if labor is inexpensive but capital is costly, a labor-intensive technique will be considered, and vice versa. The demand for and supply of labor and capital, respectively, decide labor and capital prices. The second issue will be solved in this manner.