Question

One of the Four Questions of Allocation is ______________. Within a market economy this decision is made by consumer sovereignty, i.e. consumer wants.

Answer 1

The correct answer is what to produce.

Step-by-step explanation:

We know that the basic problem in economics is the scarcity of resources. These scarce resources have alternative uses and are required to satisfy unlimited wants and needs. In this situation, four questions arise for the allocation of resources. These four questions are,

1. What to produce
2. How much to produce
3. How to distribute wealth and income
4. How to ensure efficiency

Out of these four questions, what to produce is decided by consumer wants. a rational producer will produce what consumer wants in order to earn a profit. If he produces something else, consumers may not produce causing loss to the producer.